Nomura Bank (Luxembourg) S.A. · Nomura Bank (Luxembourg) S.A. Financial Statements, Directors’ report and Independent auditor’s report ... (Luxembourg) S.A. (hereinafter referred

Nomura Bank (Luxembourg) S.A.Financial Statements,Directors’ report andIndependent auditor’s report

as of 31 March 2019

Nomura Bank (Luxembourg) S.A.33, rue de Gasperich - Building AL-5826 Hesperange

R.C.S. Luxembourg: B 032.921

NIEDERANVEN

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Table of Contents

Directors’ report 4

Independent auditor’s report 8

Financial Statements

- Statement of financial position 13

- Income statement 17

- Statement of comprehensive income 19

- Statement of changes in equity 21

- Statement of cash flows 23

- Notes to the Financial Statements 25

Directors’ ReportYear ended 31 March 2019

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Directors’ reportYear ended 31 March 2019

TO OUR SHAREHOLDERSIn 1989 Nomura Group firstly established its franchise in Luxembourg through the setup of a representative office of its brokerage house Nomura Securities Co., Ltd. which became, a year later, a fully-fledged Credit Institution: Nomura Bank (Luxembourg) S.A. (hereinafter referred to as NBL, the Bank or the Company). Since then NBL has sought to craft customized solutions and provide outstanding quality services to its clients in line with our “raison d’être” which remains unchanged: “placing our clients at the heart of everything we do”.

During the past fiscal year, we continued to invest in our infrastructure and our talents to enhance our servicing capabilities and adapt ourselves to the ever-changing asset servicing industry and concurrent evolving needs of our clients. In a difficult business environment, we are committed to investing in those business areas which we believe will generate future growth in addition to improving the cost structure of our business. However, generated efficiency gains will be partially offset by future depreciation expenses.

Moreover, conscious that our visibility in our core market is a key success driver for the Bank, we are working on building a partnership with a Nomura Group’s entity to expand further our salesforce capabilities in Japan.

Business profile and trendsAs of 31 March 2019, NBL employed a workforce of 330 staff compared to 359 a year ago which is aligned with our commitment to improve our operational efficiency as well as concurrent focus on cost control. While, due to the nature of our business, technology remains at the forefront of our effectiveness, our success relies on the expertise, experience and strong commitment of our team members. Since, human capital remains our most valuable asset we continue to invest in business aligned trainings to support new capabilities and business offerings.

Our client-centric approach, supported by our expertise, continues to support our market share and revenues. In that regard, our unique positioning as a solution provider for offshore investment vehicles and our long standing relationships with Nomura Group’s global network enabled us to retain a rather stable market share. However, the market declined and, as a result, Assets under Administration (hereinafter referred to as AuA) were USD 47,3 billion as of 31 March 2019 compared to USD 52,1 billion a year ago. The domicile split between the 265 serviced investment funds remained rather steady with a 80:20 ratio of the AuA respectively pertaining to Cayman and Luxembourg based investment structures.

Year-on-year this represents a decrease of 9% of the AuA which coincides with an anticipated decrease of the number of fund launches compared to previous years. The trend translates a change of paradigm in the Japanese fund industry where retail investors’ savings tends to be increasingly channelled into Japanese domestic funds while institutional investors’ money is increasingly allocated to more complex alternative structures, especially private equity funds. This underpins actions undertaken by the Bank to enhance further its service offering in that asset class.

Financial resultsOur largest source of revenues (custody and fund administration businesses) generated EUR 44 million in fees (compared to EUR 50 million a year ago). Besides that, treasury activities continued to generate strong revenues of EUR 21 million (identical to the previous fiscal year).

As a result, the Company’s profit before tax for the fiscal year amounted to EUR 22 million compared to EUR 28 million a year ago. The Bank’s balance sheet remained strong from a liquidity and capital perspective and it totalled as of 31 March

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2019, EUR 3,978 million (EUR 3,205 million as of 31 March 2018) while its shareholders’ equity amounted to EUR 536 million (EUR 532 million a year ago). It is proposed the Bank distributes to its shareholders a dividend amounting to EUR 10,360,000 (see Note 39).

From a Corporate structure perspective, NBL has neither bought its own shares nor created any branches or subsidiaries during the considered period. Moreover, there are no post-balance sheet events to report that would affect the financial results for the year ended 31 March 2019 or that would otherwise require a disclosure in the notes to the Financial statements.

Luxembourg subsidiaryGlobal Funds Management S.A. (hereinafter referred to as GFM), which is NBL’s fully owned Luxembourg Management Company, is continuously adapting itself in order to meet its clients’ needs and further develop its products and assets classes servicing capabilities.

In addition to its Chapter 15 (UCITS) Management Company’ status and Alternative Investment Fund Manager’ status (“AIFM”), GFM obtained in September 2018 its license as a Money Market Fund’s AIFM as per article 5 of the Money market funds – Regulation (EU) 2017/1131.

GFM will continue to focus on a controlled expansion of its license coverage and range in order to enable its legacy client and third-party client to benefit to the fullest extent possible from Luxembourg’s investment fund solutions, product regimes and strong regulatory environment.

Service Organisation Control ReportIn order to demonstrate the top-notch quality of its level of services and the effectiveness of its control environment to its existing and potential clients, the Bank has mandated Ernst & Young to issue a combined ISAE 3402 / U.S. AT section 801 report for the fiscal year ended 31 March 2019, our fourth Service Organisation Control report.

Risk management and regulatory complianceThe Bank is constantly enhancing its Risk Management Framework in order to align it with the principles and the sound risk culture promoted by Nomura Group and meet regulatory requirements. The Bank regards risk excellence as a core pillar of its financial sustainability and feels, in that respect, accountable towards its clients and shareholders.

From a governance standpoint, the Bank has proportionate internal resources and committees designed to continuously identify, monitor and mitigate all relevant risks to which it is exposed.

From a Financial soundness perspective, NBL continued to strengthen its monitoring of capital and liquidity related risk components:

Bank’s solvency ratio improved throughout the fiscal year at 82,56% as at 31 March 2019 (compared to 69,94% a year ago) which is significantly above the 10,5% regulatory requirement which illustrates the robustness of NBL’s Tier 1 capital. Given this situation, the Directors will propose to the General Meeting of Shareholders the payment of a dividend as mentioned above.

Basel III and CRR/CRD IV requirements were successfully implemented and the Liquidity Coverage Ratio requirements are being met with a ratio of 277% as at 31 March 2019 (compared to 181% at the end of the previous fiscal year).

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In accordance with its regulatory obligations and in line with Nomura Group Risk framework, NBL has performed its internal capital and liquidity adequacy assessment process and developed capital forecasts over a 3-year period. The exercise included stress tests analysis of all the material risk universes. The conclusion of the exercise was that NBL continues to be adequately capitalised and that its liquidity situation is adequately monitored and managed, in line with the overarching principles of serving its clients’ liquidity and ensuring the Bank’s long term viability.

Similarly to previous years, regulatory developments affecting our industry remained considerable. In that regard, timely addressing the increased complexity of the regulatory landscape remains a priority for NBL which remains abreast of these changes and supports its clients in leveraging connected business opportunities that may arise from those. NBL has a dedicated regulatory changes management’s arm which is managed by its Compliance function and involves all subject-matter experts within the Bank. When deemed necessary, NBL also liaises with other Nomura Group entities outside of Luxembourg for sharing of best practices. During the past fiscal year, NBL notably achieved proper implementation of a large set of instruments including but not limited to General Data Protection Regulation, the Benchmark Regulation as well as AnaCredit Regulation. Moreover, during the past fiscal year, NBL has initiated the necessary preparatory work to notably address the obligations derived from the deployment of the Register of Beneficial Owners in Luxembourg as well as the upcoming entry into force of the reporting obligations under SFTR.

The way forward: Building on our service excellence to crystalize better financial resultsDespite the evolving nature of the asset servicing environment under which we operate, what will not change is our commitment to partner with our clients to put in motion individualized solutions fully adapted to their specific needs.

From a salesforce perspective and as abovementioned, we will unceasingly work to crystallize an agreement currently under discussion with a Nomura Group’s entity to market the uniqueness of our service offering in Japan and expand further our market share. Moreover, from a cost perspective, we will achieve the financial data cost optimization program we have initiated during the past fiscal year which aims at optimizing current financial data consumption and identifying the most appropriate data providers for each asset class with the aim of materially reducing our allocated budget.

Finally, from a business outlook perspective, we still foresee substantial opportunities in the alternative asset servicing field and are committed to build on our long standing expertise and high quality standards to capture more business opportunities in this technical space.

GratitudeSince NBL’s inception, we are driven by the happiness and appreciation of our clients. We deeply appreciate the trust our clients have placed in NBL and look forward to continuing to support their growth in the years ahead.

4 June 2019

Kenji KIMURA Takashi OKAMOTO

Chairman President & CEONomura Bank (Luxembourg) S.A. Nomura Bank (Luxembourg) S.A.

Independent auditor’s report

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Independent auditor’s reportTo the Board of Directors of Nomura Bank (Luxembourg) S.A.Société Anonyme33, rue de GasperichL-5826 Hesperange

Report on the audit of the Financial StatementsOpinionWe have audited the Financial Statements of Nomura Bank (Luxembourg) S.A. (the “Bank”), which comprise the statement of financial position as at 31 March 2019, and the income statement, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and the notes to the Financial Statements, including a summary of significant accounting policies.

In our opinion, the accompanying Financial Statements give a true and fair view of the financial position of the Bank as at 31 March 2019, and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union.

Basis for opinionWe conducted our audit in accordance with EU Regulation N° 537/2014, the Law of 23 July 2016 on the audit profession (the “Law of 23 July 2016”) and with International Standards on Auditing (“ISAs”) as adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier” (“CSSF”). Our responsibilities under those Regulation, Law and standards are further described in the « Responsibilities of the “Réviseur d’Entreprises Agréé” for the audit of the Financial Statements» section of our report. We are also independent of the Bank in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”) as adopted for Luxembourg by the CSSF together with the ethical requirements that are relevant to our audit of the Financial Statements, and have fulfilled our other ethical responsibilities under those ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Financial Statements of the current period. These matters were addressed in the context of the audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Completeness and valuation of provisions for operational risk linked to the investment funds-related activities (including Fund Administration, Transfer Agent and Custodian activities)

Description

Operational risk mainly relates to errors that could occur through the day to day execution of transactions and performance of services to customers, including inter alia the execution of transactions on behalf of customers, of subscriptions and redemptions of investors in the investment funds, the identification of corporate actions, the periodic calculation of the Net Assets Value (NAV) of the investment funds, the monitoring of investment restrictions compliance as well as the safekeeping of the clients’ assets.

The Bank is subject to operational risk in relation with the above mentioned activities and we consider this as a key audit matter as the Bank is executing a high volume of transactions and operations of significant amounts on behalf of

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customers, and operational errors could lead to significant operational losses, to breaches of regulatory obligations and thus impact the reputation of the Bank.

As at 31 March 2019, the Bank has not recorded any provision for operational risk since it is not aware of any operational errors which would require a provision. Net financial impact from operational errors amounted to EUR 13,660 for the year ended 31 March 2019. Operational gains and losses are recorded respectively in the captions “Other operating income” and “Other operating expenses”.See Note 33 to the Financial Statements.

How the matter was addressed in our auditWe assessed and tested the design and operating effectiveness of the key controls implemented by the Bank over the execution of transactions, the calculation of the Net Assets Value, the monitoring of investment restrictions and the safekeeping of the customers’ assets.

We performed the following main procedures:

We obtained an understanding of the operational risk monitoring procedures and tested how identified operational losses and gains that occurred from 1 April 2018 to 31 March 2019 have been monitored and reported to the Management;

We obtained the incident reports, checked the completeness of such reports;

We checked that all incident included in the incident reports have been analyzed and a financial impact determined by the Bank;

We assessed the analysis performed by the Bank and checked that operational losses and gains impacted determined by the Bank have been adequately recorded in the Financial Statements;

We tested the IT General Controls (access management, change management, proper segregation of duties) and assessed potential impact on the Bank’s operational process;

We obtained the Service Organization Control Report (ISAE 3402) covering the Global Custody, Fund Accounting, Transfer Agency and Information Technology activities for the period from 1 April 2018 to 31 March 2019 issued by Ernst & Young Luxembourg and assessed the appropriateness of the controls’ descriptions and the outcome of the testing of the effectiveness of such controls on operational risks;

We obtained and assessed the reports issued by Internal Audit, Compliance and Risk Management and the issues identified in these reports as well as the key risks indicators implemented by Risk Management and Compliance to monitor the Bank’s activities;

We obtained and assessed the reports sent to the Management that we consider relevant for audit purposes;

We checked the correspondence with the CSSF and assessed impact on the Bank’s processes;

We obtained and assessed the claims received by the Bank and the existing litigations;

We obtained and assessed answers received from all lawyers of the Bank further to our confirmation request;

We checked and assessed the level of provisions for operational errors recorded by the Bank as at 31 March 2019 as well as the movements during the year then ended.

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Other informationThe Board of Directors is responsible for the other information. The other information comprises the information included in the Directors’ report but does not include the Financial Statements and our report of “Réviseur d’Entreprises Agréé” thereon

Our opinion on the Financial Statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report this fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors for the Financial Statements The Board of Directors is responsible for the preparation and fair presentation of the Financial Statements in accordance with IFRS as adopted by the European Union, and for such internal control as the Board of Directors determines is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.

In preparing the Financial Statements, the Board of Directors is responsible for assessing the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.

Responsibilities of the “Réviseur d’Entreprises Agréé” for the audit of the Financial Statements

The objectives of our audit are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a report of the “Réviseur d’Entreprises Agréé” that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with EU Regulation N° 537/2014, the Law of 23 July 2016 and with the ISAs as adopted for Luxembourg by the CSSF will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.

As part of an audit in accordance with EU Regulation N° 537/2014, the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control;

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Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors;

Conclude on the appropriateness of Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report of the “Réviseur d’Entreprises Agréé” to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our report of the “Réviseur d’Entreprises Agréé”. However, future events or conditions may cause the Bank to cease to continue as a going concern;

Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our report unless law or regulation precludes public disclosure about the matter.

Report on other legal and regulatory requirementsWe have been appointed as “Réviseur d’Entreprises Agréé” by the Board of Directors on 5 June 2018 and the duration of our uninterrupted engagement, including previous renewals and reappointments, is 16 years.

The Directors’ report, which is the responsibility of the Board of Directors, is consistent with the Financial Statements and has been prepared in accordance with applicable legal requirements.

We confirm that the prohibited non-audit services referred to in EU Regulation N° 537/2014 were not provided and that we remained independent of the Bank in conducting the audit.

Ernst & Young Société anonyme Cabinet de révision agréé

Charles Dequaire Luxembourg, 17 June 2019

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Statement of financial positionAs of 31 March 2019(expressed in EUR)

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Assets Notes 31 March 2019 31 March 2018

Cash, cash balances at central banks 4, 33, 34 864,920,856 382,525,822 and other demand deposits

Derivatives held for trading 5, 33, 34, 37 248,426,255 204,265,713

Financial assets mandatorily at fair value through profit or loss 6 1,003,108,049 N/A Debt instruments 1,003,108,049 N/A

Financial assets at fair value through other comprehensive income 7 13,128,526 N/A Equity instruments 13,128,526 N/A

Available-for-sale financial assets 8, 33, 34, 37 N/A 766,176,141 Equity instruments N/A 12,389,609 Debt instruments N/A 753,786,532

Financial assets at amortised cost 9, 32, 33, 34, 37 1,787,677,622 1,798,321,575 Loans and advances to credit institutions 1,188,062,626 1,507,194,309 Loans and advances to customers 599,614,996 291,127,266

Tangible assets 10, 33 2,538,991 1,980,934

Intangible assets 10, 33 38,230,017 30,493,505

Deferred tax assets 15, 33 2,361,415 2,643,821

Other assets 11, 33 18,070,500 18,463,291

Total assets 3,978,462,231 3,204,870,802

The accompanying notes form an integral part of these Financial Statements.

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Liabilities and shareholders’ equity

Liabilities Notes 31 March 2019 31 March 2018

Derivatives held for trading 12, 33, 34, 37 250,731,917 212,737,617

Financial liabilities designated at fair value through profit or loss 13, 33, 34 20,637,436 41,765,475

Financial liabilities at amortised cost 14, 33, 34, 37 3,156,095,056 2,401,776,662 Amounts due to credit institutions 16,378,860 6,209,107 Amounts due to customers 3,125,535,765 2,376,708,146 Other financial liabilities 14,180,431 18,859,409

Tax liabilities 15, 33 3,781,490 6,447,573 Current tax liabilities 217,499 2,604,034 Deferred tax liabilities 3,563,991 3,843,539

Other liabilities 16, 33 11,520,987 10,610,025

Total liabilities 3,442,766,886 2,673,337,352

Shareholders’ equity

Issued capital 17 28,000,000 28,000,000

Reserves (including Retained earnings) 18 479,548,998 472,749,562

Accumulated other comprehensive income 11,227,894 N/A

Available-for-sale reserve N/A 10,618,420

Profit for the year 16,918,453 20,165,468

Total shareholders’ equity 535,695,345 531,533,450

Total liabilities and shareholders’ equity 3,978,462,231 3,204,870,802

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Income statementFor the year ended 31 March 2019(expressed in EUR)

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Notes 31 March 2019 31 March 2018

Net interest income 20, 21, 37 3,254,851 4,553,393 Interest and similar income 26,544,002 26,714,447 Interest and similar expenses (23,289,151) (22,161,054)

Dividend income 22 --- ---

Net fee and commission income 23, 37 57,138,966 64,990,391 Fee and commission income 57,578,505 65,195,756 Fee and commission expenses (439,539) (205,365)

Net (un)realised gains (losses) on financial assets andliabilities held for trading 24 18,518,472 19,589,097

Net (un)realised gains or (-) losses on non-trading financialassets mandatorily at fair value through profit or loss 6, 25 (1,930,722) N/A

Net (un)realised gains (losses) on financial liabilitiesdesignated at fair value through profit or loss 13, 26, 34 (663,430) (6,523,907)

Foreign exchange differences 27 (411,931) 329,508

Net other operating income/expenses (1,977,366) (302,452) Other operating income 694,670 1,652,233 Other operating expenses (2,672,036) (1,954,685)

Administrative expenses 28, 31, 32, 36, 37 (49,106,801) (50,707,126)

Amortisation 10, 29 (2,938,824) (4,395,393) Tangible assets (950,368) (969,146) Intangible assets (1,988,456) (3,426,247)

Impairment (267) ---

Profit before tax 21,882,948 27,533,511

Income tax expenses 15 (4,964,495) (7,368,043)


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Statement of comprehensive incomeFor the year ended 31 March 2019(expressed in EUR)

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31 March 2019 31 March 2018


Other comprehensive income

Items that may be reclassified subsequently to profit or loss Net gains on available-for-sale financial assets - debt instruments N/A 1,206,119 Deferred tax relating to the above item N/A (160,700)

Items that will not be reclassified subsequently to profit or loss Net unrealized gains on financial assets at fair value through OCI - equity instruments 668,455 N/A Deferred tax relating to the above item (58,981) N/A

Other comprehensive income for the year, net of tax 609,474 1,045,419

Total comprehensive income for the year, net of tax 17,527,927 21,210,887

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Statement of changes in equityFor the year ended 31 March 2019(expressed in EUR)

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* Unavailable reserve(1) Legal reserve in accordance with Luxembourg law (see Note 18)(2) Reserves linked to exoneration of Net Wealth Tax charge subject to conditions (see Note 18)

Balance at31-Mar-18

IFRS 9 FTA impact

Balance after IFRS9

adoptionat 01-Apr-18

Allocation of prior year’s

profit

Dividend and net transfer to reserves

Total comprehensive

income

Balance at31-Mar-19

Issued capital 28,000,000 --- 28,000,000 --- --- --- 28,000,000

Retained earnings 421,297,889 (10,032) 421,287,857 6,809,468 (13,200,000) --- 414,897,325

Dividend to distribute

--- --- --- 13,356,000 (13,356,000) --- ---

FTA Reserve * 3,201,673 --- 3,201,673 --- --- --- 3,201,673

Reserves: 48,250,000 --- 48,250,000 --- 13,200,000 --- 61,450,000

a) Legal reserve (1) * 2,800,000 --- 2,800,000 --- --- --- 2,800,000

b) Special reserves (2) * 45,450,000 --- 45,450,000 --- 13,200,000 --- 58,650,000

AFS reserve * 10,618,420 (10,618,420) --- --- --- ---

FVOCI reserve * --- 10,618,420 10,618,420 --- --- 609,474 11,227,894

Profit for the year 20,165,468 --- 20,165,468 (20,165,468) --- 16,918,453 16,918,453

Shareholders’ equity 531,533,450 (10,032) 531,523,418 --- (13,356,000) 17,527,927 535,695,345

Balance at31-Mar-17

Transfers and allocation of prior

year’s profit

Total comprehensive

income

Balance at31-Mar-18

Issued capital 28,000,000 --- --- 28,000,000

Retained earnings 394,543,034 26,754,855 --- 421,297,889

FTA Reserve * 3,201,673 --- --- 3,201,673

Rounding 1 --- (1) ---

Reserves: 41,400,000 6,850,000 --- 48,250,000

a) Legal reserve (1) * 2,800,000 --- --- 2,800,000

b) Special reserves (2) * 38,600,000 6,850,000 --- 45,450,000

AFS reserve * 9,573,001 --- 1,045,419 10,618,420

FVOCI reserve *

Profit for the year 33,604,855 (33,604,855) 20,165,468 20,165,468

Shareholders’ equity 510,322,564 --- 21,210,886 531,533,450


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Statement of cash flowsFor the year ended 31 March 2019(expressed in EUR)

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31 March 2019 31 March 2018

Profit before tax 21,882,948 27,533,511

Adjustments: Amortisation / Impairment (Note 29) 2,938,824 4,395,393Fair value adjustments (2,480,310) (12,070,370)

Cash flows from operating profits before changes inoperating assets and liabilities 22,341,462 19,858,534

Net (increase)/decrease in loans and advances to credit institutions (357,821,598) 68,939,378Net (increase)/decrease in loans and advances to customers (308,709,852) 15,610,842Net (increase)/decrease in financial assets at fair value through OCI (13,128,526) ---Net (increase)/decrease in available-for-sale financial assets 766,785,615 59,301,801Net (increase)/decrease in financial assets mandatorily at FVTPL (1,003,108,049) ---Net (increase)/decrease in other assets 392,791 (317,474)Net increase/(decrease) in deposits from banks 10,169,753 1,617,043Net increase/(decrease) in deposits from customers 744,148,641 (518,367,572)Net increase/(decrease) in other financial liabilities (Note 34) (24,792,171) (70,611,245)Net increase/(decrease) in other liabilities 910,962 (99,677)Income tax paid (7,400,000) (7,400,000)Net variations in other operating assets/liabilities 19,997 (35,717)

Net cash flows from operating activities (170,190,975) (431,504,087)

Acquisition of intangible/ tangible assets (Note 10) (11,233,394) (14,397,280)

Net cash flows from investing activities (11,233,394) (14,397,280)

Dividends paid (13,356,000) ---

Net cash flows from financing activities (13,356,000) ---

Net increase/decrease in cash and cash equivalents (194,780,369) (445,901,367)

Cash and cash equivalents at the beginning of the year 1,591,993,805 2,037,895,172Net increase/decrease in cash and cash equivalents (194,780,369) (445,901,367)

Cash and cash equivalents at the end of the year 1,397,213,436 1,591,993,805

of which: not available 153,872,462 20,062,428

For the purposes of the statement of cash flows, cash and cash equivalents comprise the following balances with less than three months maturity from the date of acquisition:

31 March 2019 31 March 2018

Cash, cash balances at central banks andother demand deposits (Note 4) 864,920,856 382,525,822

Loans and advances to credit institutions 532,292,580 1,209,467,983repayable with less or three months maturity from the date of acquisition 532,292,580 1,209,467,983

Cash and cash equivalents 1,397,213,436 1,591,993,805


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Notes to the Financial StatementsAs of 31 March 2019

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NOTE 1 - CORPORATE INFORMATION

Corporate mattersNomura Bank (Luxembourg) S.A. (the “Bank” or “NBL”) was incorporated in Luxembourg on 2 February 1990 as a Société Anonyme.

Nature of the Bank’s businessThe object of the Bank is to undertake all banking, financial securities and fiduciary operations and to engage in leasing and factoring activities for its own account or for account of its customers.The Bank can establish or take part in finance and other companies or acquire, encumber or dispose of real estate for its own or for account of its customers.A significant volume of the Bank’s transactions is concluded directly with companies of the Nomura Group or with their Japanese clients.

Financial StatementsThe Bank’s accounting year ends on 31 March of each year. The Financial Statements were authorized for issue by the Bank’s Board of Directors on 4 June 2019.

Parent undertakingThe Bank is a subsidiary of Nomura Europe Holdings Plc (the “Parent company”), a holding company incorporated under the laws of United Kingdom and whose registered office is in London. The consolidated accounts of Nomura Europe Holdings Plc may be obtained at 1 Angel Lane, London, EC4R 3AB, UK.The Bank’s ultimate parent is Nomura Holdings, Inc., a holding company incorporated under the laws of Japan whose registered office is in Tokyo. The consolidated accounts of Nomura Holdings, Inc. may be obtained at 1-9-1, Nihonbashi, Chuoku, Tokyo 103-8645, Japan.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

2.1 - Basis of preparationThe Financial Statements are prepared on the historical cost basis except for derivatives held for trading, available-for-sale financial assets and debt certificates designated at fair value through profit or loss which are measured at fair value.

Statement of complianceThe Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and the relative interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”) as adopted for use in the European Union. The preparation of Financial Statements in accordance with IFRS requires the Board of Directors to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expense items. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.Judgments made by the Board of Directors in the application of IFRS that have significant effect on the Financial Statements and estimates with a significant risk of material adjustments in the next year are developed in Note 3.

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Classification and measurementIFRS 9 provides a single model for financial asset classification and measurement that is based on both the business model for managing financial assets and the contractual cash flow characteristics of the financial assets. These factors determine whether the financial assets are measured at amortized cost, fair value through other comprehensive income (“FVOCI”), or fair value through profit or loss (“FVTPL”). IFRS 9 requires that all debt instrument financial assets, including loans, that do not meet a solely payment of principal and interest (“SPPI”) condition, including those that contain embedded derivatives, be classified as mandatorily measured at fair value through profit or loss. For those that meet the SPPI condition, classification at initial recognition will be determined based on the business model under which these assets are managed.The accounting for financial liabilities will largely be the same as the requirements of IAS 39, except for the treatment of gains or losses arising from an entity’s own credit risk relating to liabilities designated at FVTPL. Such movements will be presented in OCI with no subsequent reclassification to the income statement, unless an accounting mismatch in profit or loss would arise.

ImpairmentIFRS 9 introduces a new impairment model based on Expected Credit Loss (“ECL”) which replaced the incurred loss model under IAS 39. Currently, impairment losses are recognized when there is objective evidence of credit quality deterioration to the extent that the Bank no longer has reasonable assurance as to the timely collection of the full amount of principal and interest. If there is no objective evidence of impairment for an individual loan, the loan is included in a group of assets with similar credit risk characteristics and collectively assessed for impairment losses. Under IFRS 9, ECL are recognized in profit or loss before a loss event has occurred, which could result in earlier recognition of credit losses compared to the current model.The expected credit loss model requires the recognition of impairment at an amount equal to the probability-weighted 12-month ECL or lifetime ECL depending on whether there has been a significant increase in credit risk since initial recognition of the financial instrument. If a significant increase in credit risk has occurred since initial recognition, then impairment is measured as lifetime ECL otherwise 12-month ECL are measured, which represent the portion of lifetime ECL that are expected to occur based on default events that are possible within 12 months after the reporting date. IFRS 9 introduces the rebuttable presumption that credit risk has increased significantly since initial recognition when contractual payments are more than 30 days past due. The Bank does not expect to rebut this presumption. If credit quality improves in a subsequent period such that the increase in credit risk since initial recognition is no longer considered significant, the loss allowance will revert back to being measured based on 12-month ECL.The IFRS 9 model consists of three stages: Stage 1 – 12-month ECL for performing instruments, Stage 2 – Lifetime ECL for performing instruments that have experienced a significant increase in credit risk, and Stage 3 – Lifetime ECL for non-performing financial assets.The risk parameters such as probability of default and loss given default are defined by Risk Management at Nomura Group level.

Financial impactsThe Bank has performed an analysis of all its financial instruments and the result has lead to the reclassification of the AFS bonds portfolio, which was previously measured at fair value through other comprehensive income (FVOCI), to the financial instruments measured at fair value through profit or loss (FVTPL) portfolio, as a consequence of the Bank’s business model for these securities. No other impacts in terms of Classification & Measurement have been identified.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

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Per IAS 39 Per IFRS 9

Classification

Carrying amount (gross carrying amount net of

impairment loss or fair value)

Cash on

hand

Cash balances at central

banks

Other demand deposits

FV P&L [HFT]

FV P&L [mandatory] FV OCI Amortised

costOther assets

Cash on hand 1,863 1,863

Cash balances at

central banks 308,796,569 308,796,516

Demand deposits with

credit institutions 73,727,390 73,727,331

Loans & Advances L&R 1,798,321,575 1,798,308,976

Debt securities AFS 753,786,532 753,786,532

Equity instruments

(excluding participating

interests and funds)

AFS 83,970 83,970

Unconsolidated

participating interestsAFS 12,305,639 12,305,639

Derivatives - Trading FV P&L - HFT 204,265,713 204,265,713

Other assets 18,463,291 18,462,304

Total 3,169,752,542 1,863 308,796,516 73,727,331 204,265,713 753,786,532 12,389,609 1,798,308,976 18,462,304

As of 1 April 2018, the ECL on the financial instruments measured at amortized cost amounted to EUR 13,698. The impact, net of deferred taxes, amounting to EUR 10,032 has been recorded in Equity as of 1 April 2018.The following table summarizes the impact of the transition from IAS 39 to IFRS 9.


Financial assets - Carrying amount per IFRS 9 3,169,738,844

Financial assets - Carrying amount per IAS 39 3,169,752,542

Valuation difference gross of tax (13,698)

Tax effect - Deferred tax income (asset) 3,666

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of principal and interest” (SPPI) condition, including those that contain embedded derivatives, be classified as mandatorily measured at fair value through profit or loss. For those that meet the SPPI condition, classification at initial recognition will be determined based on the business model under which these assets are managed.

The accounting for financial liabilities will largely be the same as the requirements of IAS 39, except for the treatment of gains or losses arising from an entity’s own credit risk relating to liabilities designated at FVPL. Such movements will be presented in OCI with no subsequent reclassification to the income statement, unless an accounting mismatch in profit or loss would arise.

ImpairmentIFRS 9 introduces a new impairment model based on Expected Credit Loss (ECL) which will replace the existing incurred loss model under IAS 39. Currently, impairment losses are recognized when there is objective evidence of credit quality deterioration to the extent that the Bank no longer has reasonable assurance as to the timely collection of the full amount of principal and interest. If there is no objective evidence of impairment for an individual loan, the loan is included in a group of assets with similar credit risk characteristics and collectively assessed for impairment losses incurred but not identified. Under IFRS 9, ECL will be recognized in profit or loss before a loss event has occurred, which could result in earlier recognition of credit losses compared to the current model.

The expected credit loss model requires the recognition of impairment at an amount equal to the probability-weighted 12-month ECL or lifetime ECL depending on whether there has been a significant increase in credit risk since initial recognition of the financial instrument. If a significant increase in credit risk has occurred since initial recognition, then impairment is measured as lifetime ECL otherwise 12-month ECL are measured, which represent the portion of lifetime ECL that are expected to occur based on default events that are possible within 12 months after the reporting date.

IFRS 9 introduces the rebuttable presumption that credit risk has increased significantly since initial recognition when contractual payments are more than 30 days past due. The Bank does not expect to rebut this presumption. If credit quality improves in a subsequent period such that the increase in credit risk since initial recognition is no longer considered significant, the loss allowance will revert back to being measured based on 12-month ECL.

The movement between 12-month and lifetime ECL and incorporation of forward-looking information may increase the volatility of provisions across the product groups, under IFRS 9 compared to IAS 39. The IFRS 9 model consists of three stages: Stage 1 – 12-month ECL for performing instruments, Stage 2 – Lifetime ECL for performing instruments that have experienced a significant increase in credit risk, and Stage 3 – Lifetime ECL for non-performing financial assets. The Stage 3 population is expected to largely align with the impaired population under IAS 39 and the write-off policy is expected to remain the same.

The risk parameters such as probability of default and loss given default are defined by Risk Management at Nomura Group level.

Hedge AccountingAs it was the case under IAS 39, the application of the hedge accounting requirements of IFRS 9 remains optional. The objective of hedge accounting is to enable an entity to provide relevant information about how it manages the risks it is exposed to and reflect the effect of its risk management activities in its accounting.

Hence, applying hedge accounting is limited to materializing in the accounting the effect of hedge relationships set up to manage the risks.


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As of 31 March 2019, the ECL calculated on the financial assets at amortized cost amounts to EUR 14,053. There is no ECL on off balance-sheet exposures. During the year ended 31 March 2019, there were no transfers between Stage 1, Stage 2 and Stage 3.

Balance-sheet exposuresGross amount

before ECLStage 1 Stage 2 Stage 3 ECL Carrying Amount

Cash, cash balances at central banks and other demand deposits

864,921,139 864,921,139 (283) 864,920,856

Financial assets at amortised cost 1,787,690,145 1,787,690,145 (12,523) 1,787,677,622

Loans and advances to credit institutions 1,187,849,717 1,187,849,717 (9,213) 1,187,840,504

Loans and advances to other financial corporations

599,105,585 599,105,585 (5) 599,105,580

Loans and advances to households 734,843 734,843 (3,305) 731,538

Other assets 18,071,747 18,071,747 (1,247) 18,070,500 Total balance-sheet 3,978,476,284 3,978,476,284 (14,053) 3,978,462,231

Off balance-sheet exposuresGross amount

before ECLStage 1 Stage 2 Stage 3 ECL Carrying Amount

Financial guarantees given 106,720 106,720 --- 106,720

Standards issued but not yet effective

The following IFRS standards and IFRIC interpretations were issued with an effective date for financial periods beginning on or after 1 January 2019. The Bank has chosen not to early adopt these standards and interpretations before their effective dates. The Bank having its end of fiscal year on March 31, the applicable date for these standards is April 1, 2019.

Only accounting policies and disclosures applicable or potentially applicable to the Bank are mentioned below.

IASB and IFRIC texts endorsed by the European Commission during previous periods but not yet applicable asfrom January 1, 2018

IFRS 16 - Leases

Background

IFRS 16 “Leases” replaces the existing standard IAS 17 “Leases” and is due to become effective for annual periods beginning on or after 1 January 2019.

IFRS 16 introduces significant changes to lease accounting by removing the distinction between operating and finance leases under IAS 17 and requires a lessee to recognize a right-of-use asset and a lease liability at commencement for all leases, except for short-term leases and leases of low values.

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Impact of the IFRS 16 standard

�The Bank intends to go for the modified retrospective application in accordance with IFRS 16 where:

�The lease liabilities of existing leases prior to first-time application of IFRS 16 are calculated based on the remaining term as of 1 April 2019;

�The interest rate used to discount future lease payments is an incremental borrowing rate (“IBR”) as defined in IFRS 16;

�The remaining leases whose terms are below twelve months as of 1 April 2019 are considered as short-term leases.

The Bank plans not to apply IFRS 16 recognition requirements for the leases where:

�the term is less than one year;

�the underlying asset is of low-value and not material for the Bank.

The Bank has performed an inventory of the existing leases that meet the recognition requirements of IFRS 16 and concluded that they are mainly composed of property leases.

The discount rate used to calculate the right-of-use asset and the lease liability for such leases is the IBR. The IBR is determined at commencement of the lease.

The estimated impacts of IFRS 16 as of 1 April 2019 are as follows:

�Right-of-use assets: EUR 6,371,431

�Lease liabilities: EUR 6,371,431

The Bank does not expect any impact on the income statement for next financial year.

IASB and IFRIC texts endorsed by the European Commission during the current period but not yet applicable asfrom January 1, 2018

�Amendments to IFRS 9 “Prepayments features with negative compensation” (issued on October 12, 2017). This amendment is applicable as from January 1, 2019;

�IFRIC 23 “Uncertainty over income tax treatments” (issued on June 7, 2017). This standard is applicable as from January 1, 2019.

IFRS and IFRIC texts issued during previous periods and neither endorsed by the European Commission norapplicable as at January 1, 2018

�Amendments to IAS 28 ”Long-term interests in associates and joint ventures” (issued on October 12, 2017). This standard is applicable as at January 1, 2019;

�Annual improvements to IFRS standards 2015-2017 Cycle (issued on December 12, 2017). These improvements are applicable as from January 1, 2019.

IFRS and IFRIC texts issued during the current period and neither endorsed by the European Commission nor applicable as at January 1, 2018

�Amendments to IAS 19 “Plan amendment, curtailment or settlement” (issued on February 7, 2018). These amendments are applicable as from January 1, 2019;

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�Amendments to References to the Conceptual Framework in IFRS standards (issued on March 29, 2018). These amendments are applicable as from January 1, 2020;

�Amendments to IFRS 3 “Business Combinations” (issued on October 22, 2018). These amendments are applicable as from January 1, 2020;

�Amendments to IAS 1 and IAS 8: Definition of Material (issued on October 31, 2018). These amendments are applicable as from January 1, 2020.

Exemption from preparing consolidated accountsThese Financial Statements are prepared on a stand-alone basis.

According to the current Luxembourg regulation, the Bank is exempt from the requirement to publish consolidated accounts and a consolidated management report.

(a) Foreign currency translation

The Financial Statements are presented in Euro (“EUR”), which is also the Bank’s functional currency.

Transactions in foreign currencies are initially recorded at the functional currency rate of exchange ruling at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency exchange rates prevailing at the reporting date. All differences arising on non-trading activities are taken to “Foreign exchange differences” in the income statement.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

(b) Financial instruments – initial recognition and subsequent measurement

(i) Date of recognition

All financial assets and liabilities are initially recognised on the value date. This includes purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the marketplace.

(ii) Initial measurement of financial instruments

The classification of financial instruments at initial recognition depends on the purpose and the management’s intention for which the financial instruments were acquired and their characteristics.

All financial instruments are measured initially at their fair value plus transaction costs, except in the case of financial assets and financial liabilities recorded at fair value through profit or loss.

(iii) Derivatives held for trading

Derivatives held for trading are recorded in the statement of financial position at fair value. Changes in fair value are recognised in “Net (un) realised gains (losses) on financial assets and liabilities held for trading”. Interest income or expense is recorded in “Net interest income” according to the terms of the contract, or when the right to the payment has been established

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(iv) Hedging derivatives

The Bank may use derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities.

The treatment of any resulting gains and losses is set out below.

A hedging relationship exists when:

- At the inception of the hedge there is formal documentation of the hedge;

- The hedge is expected to be highly effective throughout the period and prospectively;

- The effectiveness of the hedge can be reliably measured;

- For hedges of a forecasted transaction, the transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect net profit or loss.

(v) Financial liabilities designated at fair value through profit or loss

Financial liabilities classified in this category are those that have been designated by management on initial recognition. Management may only designate an instrument at fair value through profit or loss upon initial recognition when the following criteria are met, and designation is determined on an instrument by instrument basis:

- The designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the liabilities or recognising gains or losses on them on a different basis; or

- The liabilities are part of a group of financial liabilities which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; or

- The financial instrument contains one or more embedded derivatives which significantly modify the cash flows that otherwise would be required by the contract.

Financial liabilities at fair value through profit or loss are recorded in the statement of financial position at fair value. Changes in fair value are recorded in “Net (un) realised gains (losses) on financial assets and liabilities designated at fair value through profit or loss” in the income statement.

As of 31 March 2019 and 2018, included in this category are structured medium term notes issued by the Bank which contain embedded derivatives not separately recorded as permitted by IAS 39 - 11 A. These financial instruments are not listed in an active market (see Note 13).

(vi) Available-for-sale financial assets

Under IAS 39, available-for-sale financial assets included equity and debt securities. Equity instruments classified as available-for-sale were those which were neither classified as held for trading nor designated at fair value through profit or loss. Debt instruments in this category were intended to be held for an indefinite period of time and could be sold in response to needs for liquidity or in response to changes in the market conditions.

Available-for-sale equity assets included mainly non quoted investments in subsidiaries.

The Bank had not designated any loans or receivables as available-for-sale.

After initial measurement, available-for-sale financial assets were subsequently measured at fair value.

Unrealised gains and losses were recognised directly in equity in the “Available-for-sale reserve”. When the financial instrument was disposed of, the cumulative gain or loss previously recognised in equity was recognised in the income statement in “Net realised gains (losses) on financial assets and liabilities not designated at fair value through profit or loss”.

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Where the Bank held more than one investment in the same security they were deemed to be disposed of on a first-in first-out basis.

Dividends earned whilst holding available-for sale equity assets were recognised in the income statement as “Dividend income” when the right of the payment had been established. The losses arising from impairment of such investments were recognised in the income statement in “Impairment losses on financial investments” and removed from the “Available-for-sale reserve”.

(vii) Loans and advances

Under IFRS 9, loans and advances follow the business model ”Held To Collect cash flows”. Therefore they are valued at amortised cost and subjected to the ECL calculation.

Under IAS 39, loans and advances included non-derivative financial assets with fixed or determinable payments that were not quoted in an active market, other than:

- Those that the Bank intended to sell immediately or in the near term and those that the Bank upon initial recognition designated at fair value through profit or loss;

- Those that the Bank, upon initial recognition, designated as available-for-sale financial assets; or

- Those for which the Bank could not recover substantially all of its initial investment, other than because of credit d

After initial measurement, “Loans and advances” were subsequently measured at amortised cost using the effective interest rate (“EIR”), less allowance for impairment. Amortised cost was calculated by taking into account any discount or premium on acquisition and fees and costs that were an integral part of the EIR. The amortisation was included in the caption “Interest and similar income” in the income statement. The losses arising from impairment were recognised in the income statement.

(c) Derecognition of financial assets and financial liabilities

(i) Financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

- The rights to receive cash flows from the asset have expired; or

- The Bank has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either:

� The Bank has transferred substantially all the risks and rewards of the asset; or

� The Bank has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Bank has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Bank’s continuing involvement in the asset. In that case, the Bank also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Bank has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Bank could be required to repay.

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(ii) Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.

(d) Reverse repurchase agreements

Securities purchased under agreements to resell at a specified future date are not recognised in the statement of financial position. The consideration paid, including accrued interest, is recorded in the statement of financial position reflecting the transaction’s economic substance as a loan by the Bank. The difference between the purchase and resale prices is recorded in the caption “Net interest income” and is accrued over the life of the agreement using the effective interest rate (EIR).

(e) Determination of fair value

The fair value for financial instruments traded in active markets is based on their quoted market price or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.

For all other financial instruments not traded in an active market, the fair value is determined by using appropriate valuation techniques. Valuation techniques include the discounted cash flow method, comparison to similar instruments for which market observable prices exist, options pricing models, credit models and other relevant valuation models.

Certain financial instruments are recorded at fair value using valuation techniques in which current market transactions or observable market data are not available. Their fair value is determined using a valuation model that has been tested against prices or inputs to actual market transactions and using the Bank’s best estimate of the most appropriate model assumptions. Models are adjusted to reflect the spread for bid and ask prices to reflect costs to close out positions, counterparty credit and liquidity spread and limitations in the models. Also, profit or loss calculated when such financial instruments are first recorded (“Day 1” profit or loss) is deferred and recognised only when the inputs become observable or on derecognition of the instrument.

An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 34.

(f) Impairment of financial assets

IFRS 9 has introduced a new impairment model based on Expected Credit Loss (“ECL”).

The expected credit loss model requires the recognition of impairment at an amount equal to the probability-weighted 12-month ECL or lifetime ECL depending on whether there has been a significant increase in credit risk since initial recognition of the financial instrument. If a significant increase in credit risk has occurred since initial recognition, then impairment is measured as lifetime ECL otherwise 12-month ECL are measured, which represent the portion of lifetime ECL that are expected to occur based on default events that are possible within 12 months after the reporting date.

Under IAS 39, the Bank used to assess at each reporting date whether there was any objective evidence that a financial asset or a group of financial assets was impaired. A financial asset or a group of financial assets was deemed to be impaired if, and only if, there was objective evidence of impairment as a result of one or more events that had occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event (or events) had an impact on the estimated future cash flows of the financial asset or the group of financial assets that could be reliably estimated.

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Evidence of impairment could include indications that the borrower or a group of borrowers was experiencing significant financial difficulty, the probability that they would enter bankruptcy or other financial reorganisation, default or delinquency in interest or principal payments and where observable data indicated that there was a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlated with defaults.

(i) Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Bank first assesses individually whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment.

Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of “Interest and similar income”. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Bank. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to the income statement.

The present value of the estimated future cash flows is discounted at the financial asset’s original EIR. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current EIR. The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of the Bank’s internal credit grading assessment.

Future cash flows on a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group.

Historical loss experience, if any, is adjusted on the basis of current observable data to reflect the effects of current conditions on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. Estimates of changes in future cash flows reflect, and are directionally consistent with, changes in related observable data from year to year (such as changes in unemployment rates, property prices, commodity prices, payment status, or other factors that are indicative of incurred losses in the group and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.

As of 31 March 2019 and 2018, no impairment losses on financial assets carried at amortised cost have been recorded by the Bank.

(ii) Available-for-sale financial assets

For available-for-sale financial assets, the Bank assesses at each reporting date whether there is objective evidence that an investment is impaired.

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In the case of debt instruments classified as available-for-sale, the Bank assesses individually whether there is objective evidence of impairment based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement. Future interest income is based on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of “Interest and similar income”. If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to credit event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed through the income statement.

In the case of equity investments classified as available-for-sale, objective evidence would also include a “significant” or “prolonged” decline in the fair value of the investment below its cost.

Where there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement – is reclassified from equity to income statement as a reclassification adjustment. Impairment losses on equity investments are not reversed through the income statement; increases in the fair value after impairment are recognised directly in equity.

(g) Offsetting financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. This is not generally the case with master netting agreements, therefore, the related assets and liabilities are presented gross in the statement of financial position.

(h) Recognition of income and expenses

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Bank and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

(i) Interest and similar income and expenses

For all financial instruments measured at amortised cost and financial instruments designated at fair value through profit or loss, interest income or expense is recorded using the EIR, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the EIR, but not future credit losses. The carrying amount of the financial asset or financial liability is adjusted if the Bank revises its estimates of payments or receipts. The adjusted carrying amount is calculated based on the original EIR and the change in carrying amount is recorded as “Other operating income”.

Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

(ii) Fee and commission income

The Bank earns fee and commission income from a diverse range of services it provides to its customers. Fee income has to be divided into the following two categories:

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Fee income earned from services that are provided over a certain period of timeFees earned for the provision of services over a period of time are accrued over that period. These fees include commission income and asset management, custody and other management and advisory fees.

Loan commitment fees for loans that are likely to be drawn down and other credit related fees, if any, are deferred (together with any incremental costs) and recognised as an adjustment to the EIR on the loan. When it is unlikely that a loan be drawn down, the loan commitment fees are recognised over the commitment period on a straight line basis.

Fee income from providing transaction servicesFees arising from negotiating or participating in the negotiation of a transaction for a third party, such as the arrangement of the acquisition of shares or other securities or the purchase or sale of businesses, if any, are recognised on completion of the underlying transaction. Fees or components of fees that are linked to a certain performance are recognised after fulfilling the corresponding criteria.

(iii) Dividend income

Dividend income is recognised when the Bank’s right to receive the payment is established.

(i) Cash and cash equivalents

Cash and cash equivalents as referred to in the statement of cash flows comprises cash on hand, current accounts with central banks and amounts due from banks on demand or with an original maturity of three months or less.

(j) Tangible assets

Tangible assets are stated at cost excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment in value. Changes in the expected useful life are accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates.

Depreciation is calculated using the straight-line method to write down the cost of tangible assets to their residual values over their estimated useful lives. Land is not depreciated. The estimated useful lives are as follows:

- Computer hardware: 3 to 5 years;

- Other fixtures and fittings, tools and equipment: 5 years.

Tangible assets are derecognised on disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognised in the caption “Other operating income/expenses” in the income statement in the year the asset is derecognised.

(k) Intangible assets

The Bank’s intangible assets include the value of computer softwares and licenses. An intangible asset is recognised only when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it will flow to the Bank.

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

38


Development expenditures on an individual project are recognised as an intangible asset when the Bank can demonstrate:

- The technical feasibility of completing the intangible asset so that the asset will be available for use or sale;

- Its intention to complete and its ability and intention to use or sell the asset;

- How the asset will generate future economic benefits;

- The availability of resources to complete the asset;

- The ability to measure reliably the expenditure during development.

Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation is recorded in cost of sales. During the period of development, the asset is tested for impairment annually.

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statement in the expense category consistent with the function of the intangible asset.

Amortisation is calculated using the straight-line method to write down the cost of intangible assets to their residual values over their estimated useful lives as follows:

- Computer software and licenses: 3 to 5 years.

(l) Impairment of non-financial assets

The carrying amounts of the Bank’s assets, except deferred income tax assets and financial assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the income statement. The recoverable amount of other assets is the greater of their net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

As of 31 March 2019 and 2018, the Bank has not recorded any impairment on non-financial assets.

(m) Financial guarantees

In the ordinary course of business, the Bank gives financial guarantees, consisting of letters of credit, guarantees and acceptances. Financial guarantees are initially recognised in the financial statements (within “Other liabilities”) at fair value, being the premium received. Subsequent to initial recognition, the Bank’s liability under each guarantee is measured at the higher of the amount initially recognised less, when appropriate, cumulative amortisation recognised in the income statement, and the best estimate of expenditure required to settle any financial obligation arising as a result of the guarantee.

Any increase in the liability relating to financial guarantees is recorded in the income statement. The premium received is recognised in the income statement in the caption “Net fee and commission income” on a straight line basis over the life of the guarantee.

39

(n) Pension benefits

The Bank operates a defined contribution pension plan. The contribution payable to a defined contribution plan is in proportion to the annual gross salary of the concerned employees and is recorded as an expense under “Administrative expenses”. Unpaid contributions are recorded as a liability.

(o) Provisions

Provisions are recognised when the Bank has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the income statement net of any reimbursement.

(p) Taxes

Income tax on the income statement for the year comprises current and deferred taxes. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

(i) Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted at the reporting date.

(ii) Deferred income tax

Deferred income tax is provided using the liability method, on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

- Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

- In respect of taxable temporary differences associated with investments in subsidiaries, associates and interest in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised except:

- Where the deferred income tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

- In respect of deductible temporary differences associated with investments in subsidiaries, associates and interest in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be


40


utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Income tax relating to items recognised directly in equity is recognised in equity and not in the income statement.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

(q) Comparative figures

Certain comparative figures as of 31 March 2018 have been modified to allow a better comparison.

The accounts receivable for the account of third parties as of 31 March 2018 and 31 March 2019 which respectively amount to EUR 18,859,409 and EUR 14,180,425 and that were classified under the caption “Other Assets” in the 2018 financial statements have been reclassified under the caption “Loans and advances” in this report. Similarly, the accounts payable for the account of third parties as of 31 March 2018 and 31 March 2019 which respectively amount to EUR 18,859,409 and EUR 14,180,431 and that were classified under the caption “Other Liabilities” in the 2018 financial statements have been reclassified under the caption “Other financial liabilities” in this report. This reclassification is to align with the current financial regulatory reporting.

NOTE 3 - SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Bank makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Going concern

The Bank’s Board of Directors has made an assessment of the Bank’s ability to continue as a going concern and is satisfied that the Bank has the resources to continue in business for the foreseeable future. Furthermore, the Board of Directors is not aware of any material uncertainties that may cast significant doubt upon the Bank’s ability to continue as a going concern. Therefore, the Financial Statements continue to be prepared on the going concern basis.

(b) Estimation of fair values of financial instruments

The following summarises the major methods and assumptions used in estimating the fair values of financial instruments.

(i) Securities

The fair values of quoted investments in active markets are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Bank establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants.

41

NOTE 3 - SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS (continued)

(ii) Derivatives

The fair value of derivatives is calculated, for listed instruments, on the basis of market prices ruling at the end of reporting period. When market prices are not available and/or reliable, valuation methods and models are used based on market-derived data (e.g. valuation of listed instruments with similar characteristics, discounted cash flow analysis, option price calculation methods, or valuation used in comparable transactions).

When discounted cash flow techniques are used, estimated future cash flows are based on Board of Directors’ best estimates and the discount rate is a market related rate for a similar instrument at the reporting date. Where other pricing models are used, inputs are based on market related data at the reporting date.

(iii) Interest-bearing loans and borrowings

Fair value is calculated based on discounted expected future principal and interest cash flows.

Where quoted market prices or broker/dealer quotations are not available, prices for similar instruments or valuation pricing models are considered in the determination of fair value. Valuation pricing models consider contractual terms, position size, underlying asset prices, interest rates, dividend rates, time value, volatility and other statistical measurements for the relevant instruments or for instruments with similar characteristics. These models also incorporate adjustments relating to market liquidity adjustments. These adjustments are fundamental components of the fair value calculation process. The valuation technique used maximises the use of market inputs and minimises the use of entity-specific inputs which are unobservable in the market.

Valuation pricing models and their underlying assumptions impact the amount and timing of unrealised gains and losses recognised, and the use of different valuation pricing models or underlying assumptions could produce different financial results. Any changes in the fixed income, equity, and foreign exchange and commodity markets can impact the Bank’s estimates of fair value in the future, potentially affecting trading gains and losses. The Bank’s estimates of fair value may involve greater subjectivity due to the lack of transparent market data available upon which to base assumptions underlying valuation pricing models.

(iv) Other financial assets / liabilities

For other financial assets / liabilities with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. All other receivables / payables are discounted to determine the fair value.

(c) Impairment

Assets are subject to impairment tests at the end of reporting periods. In determining whether an impairment loss should be recognised, the Bank makes judgements to ascertain whether there is any objective evidence that a financial asset or group of financial assets is impaired. If there is evidence of a long-term reduction in the value of the asset concerned, this is recognized in income statement on the basis of market prices in the case of listed instruments, and of estimated future cash flows discounted according to the original effective interest rate in the case of unlisted instruments. If the reasons for which the loss was recorded subsequently cease to apply, the impairment is written back to profit or loss accounts.

(d) Deferred taxes

Provisions for income taxes have been calculated on the basis of current, advance and deferred obligations. Advance and deferred taxes are calculated on the basis of temporary differences - without time limits - between the carrying amount of an asset or liability and its tax base.

42

NOTE 3 - SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS (continued)

Deferred tax assets and liabilities have been stated using the assumptions that the tax base of the assets and liabilities are determined by reference to Luxembourg tax principles.

NOTE 4 - CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEMAND DEPOSITS (IN EUR)

31 March 2019 31 March 2018

Cash on hand 2,037 1,863

Cash balances at central banks 648,599,961 308,796,569

Other demand deposits 216,318,858 73,727,390

Total 864,920,856 382,525,822

Credit institutions established in Luxembourg are required to hold minimum reserves with the Luxembourg Central Bank. These deposits represent 1% of some of their liabilities. Compliance with the reserve requirement is determined on the basis of the institutions’ average daily reserve holdings over the maintenance period; thus reserves of credit institutions can vary from one day to another following their treasury management, the money market or their expectations in terms of interest rates.

Mandatory reserve deposits with the Luxembourg Central Bank are not used in the Bank’s day to day operations.

NOTE 5 - DERIVATIVES HELD FOR TRADING - ASSETS (in EUR)

They are composed of the positive fair values of equity linked swaps with an interest component contracts (“ELS”) and forward foreign exchange transactions.

The Bank has entered into equity linked swaps contracts mainly in the context of its medium term notes program (see Note 13). These transactions do not qualify for hedge accounting in accordance with IFRS 9 provisions.

The Bank has entered into forward foreign exchange contracts mainly in the context of clients’ transactions (these positions are then covered by a reverse transaction in the market) and, to a non-significant extent, for dealing purposes.

31 March 2019 31 March 2018

Unlisted Unlisted

Derivatives on interest rates --- 21,800

Derivatives on foreign exchange rates 248,426,255 204,243,913

Total 248,426,255 204,265,713

As of 31 March 2019, the global notional amount of the ELS contracts, including ELS with negative fair values, amounts to EUR 29,341,372 (2018: EUR 51,132,842), which is equal to the nominal of the notes (see Note 13).

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Interest rates Foreign currency Total - 31 March 2019Type of derivatives /

Notional Fair Notional Fair Notional FairUnderlying items amount value amount value amount value

Unlisted financial derivatives --- --- 13,471,944,140 248,426,255 13,471,944,140 248,426,255

Total --- --- 13,471,944,140 248,426,255 13,471,944,140 248,426,255

Interest rates Foreign currency Total - 31 March 2018Type of derivatives /

Notional Fair Notional Fair Notional FairUnderlying items amount value amount value amount value

Unlisted financial derivatives 1,902,975 21,800 16,704,587,553 204,243,913 16,706,490,528 204,265,713

Total 1,902,975 21,800 16,704,587,553 204,243,913 16,706,490,528 204,265,713

NOTE 5 - DERIVATIVES HELD FOR TRADING - ASSETS (in EUR) (continued)

NOTE 6 - FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS (in EUR)

Debt instruments

They are composed of: 31 March 2019 31 March 2018

Listed financial assets 1,003,108,049 N/A

Total 1,003,108,049 N/A

As of 31 March 2019, listed debt instruments are composed of Japanese, US and European countries highly liquid bonds with residual maturity less than 6 months.

31 March 2019 31 March 2018

France 180,074,844 N/A

Japan 764,138,412 N/A

Belgium 50,016,535 N/A

USA 8,878,258 N/A

Total 1,003,108,049 N/A

As of 31 March 2018, those debt instruments were classified under the caption ”Available-for-sale financial assets”

(Note 8).

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NOTE 6 - FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS (in EUR) (continued)

Collateral posted

As of 31 March 2019, the Bank has pledged debt securities which have a total fair value of EUR 166,629,160 of which EUR 150,046,408 in favour of Euroclear in order to benefit from a credit facility of USD 400 million maximum to cover daily settlement activity.

31 March 2019 31 March 2018

Fair value of pledged securities 166,629,160 N/A

NOTE 7 - FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (in EUR)

Equity instruments

They were composed of: 31 March 2019 31 March 2018

Unlisted equity investments 13,128,526 N/A

Total 13,128,526 N/A

As of 31 March 2019, investments in subsidiaries are composed of shares in the following affiliated undertakings:

Name: Global Funds Management S.A.Registered office: 33, rue de Gasperich L-5826 HesperangeProportion of the capital held: 100%Amount of capital and reserves as of 31.03.2019: EUR 8,667,810Profit for the year ended 31.03.2019: EUR 366,919

Name: Global Funds Trust CompanyRegistered office: c/o Maples & Calder P.O. Box 309, Ugland House George Town, Grand Cayman Cayman IslandsProportion of the capital held: 100%Amount of capital and reserves as of 31.03.2019: EUR 2,659,859Profit for the year ended 31.03.2019: EUR 307,104

Financial assets at fair value through other comprehensive income are also composed, for a not significant amount, of other unlisted securities

As of 31 March 2018, those shares were classified under the caption ”Available-for-sale financial assets” (Note 8).

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NOTE 8 - AVAILABLE-FOR-SALE FINANCIAL ASSETS (in EUR)

Equity instruments


Unlisted equity investments N/A 12,389,609

Total N/A 12,389,609

As of 31 March 2018, unlisted equity instruments were mainly composed of shares in the following affiliated undertakings:

Name: Global Funds Management S.A.Registered office: 33, rue de Gasperich L-5826 HesperangeProportion of the capital held: 100%Amount of capital and reserves as of 31.03.2018: EUR 8,485,711Profit for the year ended 31.03.2018: EUR 182,099

Name: Global Funds Trust CompanyRegistered office: c/o Maples & Calder P.O. Box 309, Ugland House George Town, Grand Cayman Cayman IslandsProportion of the capital held: 100%Amount of capital and reserves as of 31.03.2018: EUR 2,330,957Profit for the year ended 31.03.2018: EUR 328,902

Available-for-sale equity assets were also composed, for a not significant amount, of other unlisted securities.

Debt instruments


Listed debt instruments N/A 753,786,532

Total N/A 753,786,532

As of 31 March 2018, listed debt instruments were composed of Japanese and European countries highly liquid bonds with residual maturity less than 6 months.

31 March 2019 31 March 2018

France N/A 589,297,005

Japan N/A 152,329,343

Belgium N/A 12,160,184

Total N/A 753,786,532

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NOTE 8 - AVAILABLE-FOR-SALE FINANCIAL ASSETS (in EUR) (continued)

Collateral posted

As of 31 March 2018, the Bank had pledged debt securities which had a total fair value of EUR 141,658,350 of which EUR 129,040,659 in favour of Euroclear in order to benefit from a credit facility of USD 400 million maximum to cover daily settlement activity.

31 March 2019 31 March 2018

Fair value of pledged securities N/A 141,658,350

NOTE 9 – FINANCIAL ASSETS AT AMORTISED COST (in EUR)

31 March 2019 31 March 2018

Loans and advances to:

- Credit institutions 1,188,062,626 1,507,194,309

- Other financial corporations 598,883,458 290,356,488

- Households 731,538 770,778

Total 1,787,677,622 1,798,321,575

As of 31 March 2019, under IFRS 9, the Bank has recorded an ECL on its financial assets at amortised cost for an amount of EUR 12,523.

As of 31 March 2018, the Bank had not recorded any specific and/or collective impairment on its loans and advances under IAS 39.

Financial assets at amortised cost to credit institutions - breakdown:

31 March 2019 31 March 2018

Reverse Repurchase agreements 403,975,460 676,880,875

Other term loans 776,015,479 824,544,290

Advances that are not loans 8,071,687 5,769,144

Total 1,188,062,626 1,507,194,309

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NOTE 9 – FINANCIAL ASSETS AT AMORTISED COST (in EUR) (continued)

Financial assets at amortised cost to other financial corporations - breakdown:

31 March 2019 31 March 2018

Reverse Repurchase agreements 592,750,395 277,266,223

Other term loans 24,325 ---

Advances that are not loans 6,108,738 13,090,265

Total 598,883,458 290,356,488

Guarantees received as collateral

The reverse repurchase agreements are fully secured by government or corporate bonds.

Advances that are not loans are accounts receivable for the account of third parties. These accounts are “Transitory accounts” maintained by the Bank for operational purposes and are linked to the accounts payable for the account of third parties disclosed in the caption “Other financial liabilities” (Note 14).

Financial assets at amortised cost to households - breakdown:

31 March 2019 31 March 2018

Credit cards, personal loans and loans guaranteed by payrolls 731,538 770,778

Total 731,538 770,778

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Tangible and intangible Gross Additions Gross value Accumulated Accumulated Net Net assets value at the at the end of depreciation depreciation carrying carrying beginning of the financial at the begin- at the end of value value the financial year ning of the the financial as of as of year financial year year 31 March 2019 31 March 2018

Tangible assets 15,033,747 1,508,426 16,542,173 (13,052,814) (14,003,182) 2,538,991 1,980,934 of which: Computer hardware 10,329,946 1,446,441 11,776,387 (8,494,086) (9,399,846) 2,376,541 1,835,861 Office furniture, fixtures, fittings and equipment 4,703,801 61,985 4,765,786 (4,558,728) (4,603,336) 162,450 145,073

Intangible assets 60,988,515 9,724,968(1) 70,713,483 (30,495,010) (32,483,466) 38,230,017 30,493,505 of which: Computer software and licences 60,988,515 9,724,968 70,713,483 (30,495,010) (32,483,466) 38,230,017 30,493,505

NOTE 10 - MOVEMENTS IN TANGIBLE AND INTANGIBLE ASSETS (in EUR)

The following table presents the movements in tangible and intangible assets during the financial year:

(1) This amount relates mainly to the work in progress concerning IT developments.

NOTE 11 - OTHER ASSETS (in EUR)

31 March 2019 31 March 2018

Commissions receivable 9,582,478 10,390,332

Prepaid expenses and other items 8,488,022 8,072,959

Total 18,070,500 18,463,291

Commissions receivable refer to fees receivable for the services (mainly Custodian, Administration and Paying Agency services) rendered by the Bank. A significant part of those commissions are usually claimed on a quarterly basis.

NOTE 12 - DERIVATIVES HELD FOR TRADING - LIABILITIES (in EUR)

They are composed of the negative fair values of the ELS and the forward foreign exchange contracts.

The Bank has entered into the ELS in the context of the medium term notes program (see Note 13). These transactions do not qualify for hedge accounting in accordance with IFRS 9 provisions.

The Bank enters into forward foreign exchange contracts mainly in the context of clients’ transactions (these positions are then covered by a reverse transaction in the market) and, to a non-significant extent, for dealing purposes.

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Type of derivatives/ Interest rates Foreign currency Total - 31 March 2019

Underlying items Notional Fair Notional Fair Notional Fair amount value amount value amount value

Unlisted derivative products Financial derivatives 29,341,372 8,703,937 13,314,774,803 242,027,980 13,344,116,175 250,731,917

Total 29,341,372 8,703,937 13,314,774,803 242,027,980 13,344,116,175 250,731,917

Type of derivatives/ Interest rates Foreign currency Total - 31 March 2018

Underlying items Notional Fair Notional Fair Notional Fair amount value amount value amount value

Unlisted derivative products Financial derivatives 49,229,867 9,389,167 16,808,899,186 203,348,450 16,858,129,053 212,737,617

Total 49,229,867 9,389,167 16,808,899,186 203,348,450 16,858,129,053 212,737,617

NOTE 12 - DERIVATIVES HELD FOR TRADING - LIABILITIES (in EUR) (continued)

31 March 2019 31 March 2018

Unlisted Unlisted

Derivatives on interest rates 8,703,937 9,389,167

Derivatives on foreign exchange rates 242,027,980 203,348,450

Total 250,731,917 212,737,617

NOTE 13 - FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS (in EUR)

The Bank issued structured medium term notes with a nominal value of EUR 29,341,372 (2018: EUR 51,132,842) and with structured coupon rates, including embedded derivatives.

The Bank has decided to use the fair value option (see Note 2.2 (b) (v)) to measure these debt certificates under the medium term notes program due to their embedded derivatives. These financial instruments are not listed in an active market. Their fair value is calculated using a valuation technique (see Note 34).

In the context of the medium term notes program, the Bank has entered into equity linked swap transactions (see Notes 5 and 12).

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NOTE 14 - FINANCIAL LIABILITIES AT AMORTIZED COST (in EUR)

Amounts due to credit institutions

As of 31 March 2019 and 2018, they are composed of: 31 March 2019 31 March 2018

Current accounts, margin calls and deposits on demand 16,378,860 6,209,107

Total 16,378,860 6,209,107

Amounts due to customers


Current accounts 3,116,273,722 2,367,366,190

Term deposits 9,262,043 9,341,956

Total 3,125,535,765 2,376,708,146

Other financial liabilities


Other financial liabilities 14,180,431 18,859,409

Total 14,180,431 18,859,409

Other financial liabilities are accounts payable for the account of third parties. These accounts are “Transitory accounts” maintained by the Bank for operational purposes and are linked to the accounts receivable for the account of third parties disclosed in the caption “Financial assets at amortised cost” (Note 9).

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NOTE 15 - TAX EXPENSES, ASSETS AND LIABILITIES (in EUR)

The components of income tax expenses, tax assets and tax liabilities for the years ended 31 March 2019 and 2018 are:

31 March 2019 31 March 2018

Deferred tax assets - due to temporary deductible differences 2,361,415 2,643,821

Total tax assets 2,361,415 2,643,821

Current tax liabilities 217,499 2,604,034

Deferred tax liabilities - due to temporary taxable differences 3,563,991 3,843,539

Total tax liabilities 3,781,490 6,447,573

Income tax expenses 31 March 2019 31 March 2018

Current taxes 5,014,000 7,413,188

Deferred taxes (49,505) (45,145) Related to the fiscal year (36,868) (57,706) Changes in income tax rate (12,637) 12,561

Total 4,964,495 7,368,043

Reconciliation of the total tax expenses

The reconciliation between the tax expenses and the accounting profit multiplied by Luxembourg tax rate for the years ended 31 March 2019 and 2018 is as follows:

31 March 2019 31 March 2018

Accounting profit before tax 21,882,948 27,533,511

Tax expenses at income tax rate of 24,94% (2018: 26,76%) 5,457,607 7,367,968

+/- adjustments linked to: income not subject to tax --- --- non-deductible expenses (15,850) ---

Other (477,262) 75

Income tax expenses 4,964,495 7,368,043

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NOTE 16 - OTHER LIABILITIES (in EUR)

31 March 2019 31 March 2018

Salary related contributions 2,393,217 2,311,850

Deferred revenues 5,059,944 4,803,682

Other 4,067,826 3,494,493

Total 11,520,987 10,610,025

Deferred revenues include payments received by the Bank for its agency activities within its own medium term notes program and within other debt securities programs carried out by other companies of the Nomura Group for which the Bank delivers agency services (Calculation Agent, Paying Agent and Settlement Agent).

NOTE 17 - ISSUED CAPITAL (in EUR)

As of 31 March 2019 and 2018, the Bank’s authorised, subscribed and paid-up capital amounts to EUR 28,000,000 represented by 2,800 ordinary shares with a nominal value of EUR 10,000 each.

NOTE 18 - RESERVES (INCLUDING RETAINED EARNINGS) (in EUR)

Under Luxembourg law, the Bank must appropriate to a legal reserve an amount equivalent to at least 5% of the annual net profit until such reserve is equal to 10% of the share capital. This appropriation is made in the following year. Distribution of the legal reserve is restricted.

The Bank transferred EUR 12,600,000 to a net worth tax (NWT) reserve for the tax year 2018, released the special reserve 2012 for EUR 5,800,000 and released the special reserve 2013 for EUR 7,100,000 Luxembourg tax legislation provides for a reduction in the net worth tax equal to its global amount on the condition that a special reserve is established in an amount equal to 5 times the net worth tax reduction for the current year, and maintained for 5 years. Additionally and to comply with new Luxembourg Circular I. Fort. N°47quater issued by the Luxembourg tax authorities on 17 May 2018, the Bank transferred EUR 13,500,000 to a net worth tax (NWT) reserve for the tax year 2019 from its retained earnings (Refer to Statement of changes in equity).

Allocation of the profit for the year ended 31 March 2018:

Profit for the year ended 31 March 2018 20,165,468

Distribution of dividend (13,356,000)

Allocation to retained earnings (6,809,468)

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NOTE 18 - RESERVES (INCLUDING RETAINED EARNINGS) (in EUR) (continued)

Allocation from retained earnings for the year ended 31 March 2018:

Release of the NWT reserve 2012 5,800,000

Release of the NWT reserve 2013 7,100,000

Transfer to a special reserve for NWT for year 2018 (12,600,000)

Transfer to a special reserve for NWT for year 2019 (13,500,000)

Net transfer from retained earnings (13,200,000)

NOTE 19 - ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

As of 31 March 2019, the aggregate amount of the Bank’s assets denominated in currencies other than EUR, translated into EUR, amounts to EUR 2,713,352,443 (2018: EUR 1,997,853,399).

As of 31 March 2019, the aggregate amount of the Bank’s liabilities denominated in currencies other than EUR, translated into EUR, amounts to EUR 3,200,973,313 (2018: EUR 2,347,613,284).

NOTE 20 - INTEREST AND SIMILAR INCOME (in EUR)

31 March 2019 31 March 2018

Derivatives - trading 952,029 6,412,892

Debt securities --- 2,633,689

Loans and advances 25,514,396 17,237,163

Deposits 77,577 430,703

Total 26,544,002 26,714,447

NOTE 21 - INTEREST AND SIMILAR EXPENSES (in EUR)

31 March 2019 31 March 2018

Debt securities (negative interest rates) --- 1,681,897

Loans and advances (negative interest rates) 999,472 1,486,663

Deposits 21,414,170 12,807,936

Debt securities issued 875,509 6,174,364

Other --- 10,194

Total 23,289,151 22,161,054

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NOTE 22 - DIVIDEND INCOME

No dividend has been received for the years ended 31 March 2019 and 2018.

NOTE 23 - NET FEE AND COMMISSION INCOME (in EUR)

31 March 2019 31 March 2018

Administration fees 31,063,799 36,238,594

Custody fees 14,275,957 15,058,360

Other fees 12,238,749 13,898,802

Total fee and commission income 57,578,505 65,195,756

Total fee and commission expenses (439,539) (205,365)

Net fee and commission income 57,138,966 64,990,391

NOTE 24 - NET (UN)REALISED GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING

For the years ended 31 March 2019 and 2018, this caption includes the realised and unrealised gains and losses on derivative financial instruments.

NOTE 25 - NET (UN)REALISED GAINS OR (-) LOSSES ON NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS (in EUR)

31 March 2019 31 March 2018

Debt securities (1,930,722) N/A

Total (1,930,722) N/A

NOTE 26 - NET (UN)REALISED GAINS (LOSSES) ON FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS (in EUR)

31 March 2019 31 March 2018

Debt securities issued (663,430) (6,523,907)

Total (663,430) (6,523,907)

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NOTE 27 - FOREIGN EXCHANGE DIFFERENCES (in EUR)

31 March 2019 31 March 2018

Spot exchange on derivatives and other financial instruments

Gains 475,053,933 474,007,135

Losses (475,465,864) (473,677,627)

Total (411,931) 329,508

NOTE 28 - ADMINISTRATIVE EXPENSES (in EUR)

31 March 2019 31 March 2018

Wages and salaries - Wages and salaries 26,644,720 27,170,076- Social contributions 2,973,086 2,738,297- Other expenses 1,532,300 1,990,596- Defined contribution plan 503,279 552,933

Total wages and salaries 31,653,385 32,451,902

Other administrative expenses - Advisory and audit fees 1,117,511 785,139- Legal fees 28,158 86,458- Maintenance, repairs and refurbishment 10,104 15,334- Rents and leases 2,436,521 2,647,197- Service providers 133,188 164,214 - Couriers 24,552 30,161 - Telephone and web services 108,636 134,053- Agency and travel expenses 181,226 156,030- Membership subscription 1,490,492 1,271,706- IT costs 6,363,120 6,877,771- Pricing and other services 5,194,536 5,637,681- Other 498,560 613,694

Total other administrative expenses 17,453,416 18,255,224

Total administrative expenses 49,106,801 50,707,126

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NOTE 29 - AMORTISATION AND IMPAIRMENT (in EUR)

For the years ended 31 March 2019 and 2018, amortisation and impairment are as follows:

31 March 2019 Amortisation Impairment Total

Tangible assets 950,368 --- 950,368

Intangible assets 1,988,456 --- 1,988,456

Total 2,938,824 --- 2,938,824

31 March 2018 Amortisation Impairment Total

Tangible assets 969,146 --- 969,146

Intangible assets 3,426,247 --- 3,426,247

Total 4,395,393 --- 4,395,393

NOTE 30 - GUARANTEES, CONTINGENT LIABILITIES AND COMMITMENTS (in EUR)

As of 31 March 2019 and 2018, the Bank’s guarantees and commitments may be analysed as follows:

31 March 2019 31 March 2018

Guarantees given Financial guarantees 106,720 122,920

Total 106,720 122,920

As of 31 March 2019 and 2018, guarantees given are composed of guarantees given on behalf of some of the Bank’s employees to third parties for an amount of EUR 106,720 (2018: EUR 122,920).

The Bank has also entered into certain other commitments which are not disclosed in the statement of financial position but which are significant for the purpose of assessing the financial situation of the Bank. As of 31 March, details of such other commitments are as follows:

31 March 2019 31 March 2018

Commitments in respect of fixed rental payments contracted for premises 5,016,862 7,346,763

There were no such commitments toward related parties as of 31 March 2019 and 2018.

Legal claimsLitigation is a common occurrence in the banking industry due to the nature of the business undertaken. The Bank has formal controls and policies for managing legal claims. Once professional advice has been obtained and the amount of loss reasonably estimated, the Bank makes adjustments to account for any adverse effects which the claims may have on its financial position.

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NOTE 30 - GUARANTEES, CONTINGENT LIABILITIES AND COMMITMENTS (in EUR) (continued)

Deposit guarantee schemes – Fonds de garantie des dépôts Luxembourg (« FGDL ») and Fonds de résolution (« FRL »)The law related to the resolution, reorganization and winding-up measures of credit institutions and certain investment firms and on deposit guarantee and investor compensation schemes (the “Law”), transposing into Luxembourgish law the directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms and the directive 2014/49/EU related to deposit guarantee and investor compensation schemes, was passed on 18 December 2015.

This new system will cover eligible deposits of each depositor up to an amount of EUR 100,000 and investments up to an amount of EUR 20,000. The Law also provides that deposits resulting from specific transactions or fulfilling a special social or other purpose are covered for an amount above EUR 100,000 for a period of 12 months.

The funded amount of the FRL shall reach by the end of 2024 at least 1% of covered deposits, as defined in article 1 number 36 of the Law, of all authorized credit institutions in all participating Member States. This amount will be collected from the credit institutions through annual contributions during the years 2015 to 2024. The amount paid by the Bank as of 31 March 2019 in that respect is EUR 911,728 (31 March 2018: EUR 795,744).

The target level of funding of the FGDL is set at 0,8% of covered deposits, as defined in article 163 number 8 of the Law, of the relevant credit institutions and is to be reached by the end of 2018 through annual contributions. The contributions are to be made in the form of annual payments during the years 2016 to 2018. No contribution was made for the year ended 31 March 2019 as the Bank had no covered deposits.

When the level of 0,8% is reached, the Luxembourg-based credit institutions should continue contributing for 8 additional years in order to reach an additional safety buffer of 0,8% of covered deposits as defined in article 163 number 8 of the Law.

NOTE 31 - STAFF

For the years ended 31 March 2019 and 2018, the average number of Bank’s staff is as follows:

31 March 2019 31 March 2018

Management – Senior 4 5

Management – Middle 49 50

Other staff 277 304

Total 330 359

As of 31 March 2019 and 2018, the Bank has granted advances and credits to members of its managerial bodies and has entered into guarantees on their behalf as follows (in EUR):

31 March 2019 31 March 2018

Guarantees Managerial bodies 9,500 17,900

Total 9,500 17,900

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NOTE 32 - AUDIT FEES (in EUR)

For the years ended 31 March 2019 and 2018, the fees paid to the Réviseur d’entreprises agréé are split as follows (excluding VAT):

31 March 2019 31 March 2018

Statutory audit 178,480 164,369

Other assurance services 102,125 85,000

Tax services --- ---

Total 280,605 249,369

For the year ended 31 March 2019, “Other assurance services” consisted of the issuance of a Service Organization Control (“SOC”) Report Type II on global custody, fund accounting, transfer agency and information technology activities, and the issuance of an Agreed Upon Procedures (“AUP”) Report in relation to the IAS 39/IFRS 9 transition as at 31 March 2018/1 April 2018 as requested by the CSSF.

For the year ended 31 March 2018, “Other assurance services” consisted of the issuance of a Service Organization Control (“SOC”) Report Type II on global custody, fund accounting, transfer agency and information technology activities.

NOTE 33 - RISK MANAGEMENT (in EUR)

In the Note 33, the concept of “hedging” is to be understood from an economic point of view and not from an IFRS point of view.

1. Three Lines of Defence Model

The Bank has adopted the “Three Lines of Defence” model as the outline for risk governance, comprising the following elements:

1) First line of defence – risk owners: the business owns and manages its risks in accordance with agreed risk policies, limits and controls, at the operational level. It is composed of the Bank’s business activities, including Fund Administration Division, Depositary Banking Division (with the exception of the Depositary Control & Oversight Department), and Client Support Division.

2) Second line of defence – risk control functions: formed of support functions, responsible for defining risk policies and risk processes and controls that contribute to the Bank’s overall risk control. For instance: Risk Management Department, Compliance Department, Corporate Legal Department, Fund Legal Department, Corporate Planning & Strategy Division, IT-Strategic Change Management Division, Depositary Control & Oversight Department,the Data Privacy Manager and Information Security Department.

3) Third line of defence – risk assurance function: provides independent, objective and critical review of the first two lines of defence. This is performed by Internal Audit Department, which reports to the Audit Committee and the Board of Directors.

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NOTE 33 - RISK MANAGEMENT (in EUR) (continued)

2. Embedding risk governance across the Bank

Board of Directors

The Board of Directors has the ultimate responsibility for setting up the Bank’s appetite for risks and the tolerance limits. In case that the risk appetite is significantly breached, the Board of Directors shall require corrective measures, which may need to be reported to the regulator as per regulatory requirements.

The Board of Directors shall globally define strategies and supervise the risk management and capital adequacy. The Board of Directors also ensures that Management establishes a framework for assessing the various risks, develops a system to relate risk to the Bank’s capital level and establishes a method for monitoring compliance with internal policies. The Board of Directors shall promote the risk culture across the Bank.

Executive Committee (“ExCom”)

The ExCom has the responsibility to manage the Bank’s day-to-day activities. Regarding risk management, the ExCom has to:

1) Implement the Risk Appetite;

2) Adopt and support Risk Management policies and procedures, including controls;

3) Set guidelines for the Risk Management framework;

4) Promote the risk culture across the Bank;

5) Define and review the risk strategy of the Bank.

Risk Management Committee

The purpose of this Committee is to assist the ExCom in fulfilling its responsibility with respect to:

1) Assess the adequacy between the risks incurred, the Bank’s ability to manage these risks and the internal and regulatory own funds and liquidity reserveS;

2) Oversight of the Bank’s Risk Management framework, including the significant policies, procedures and practices used in managing the Bank’s risks;

3) Review certain risk limits and regular risk reporting and make recommendations to the ExCom when appropriate;

4) Review operational risk events and root causes analysis.

5) The Risk Management Committee meets on a monthly basis and it is well represented by ExCom members as well as Senior Management of the business units.

Other Committees or Groups

The following Committees meet also on a regular basis to complement the risk governance of the Bank:

1) Asset and Liability Committee (“ALCO”);

2) Business Continuity Management Committee;

3) Change Advisory Board;

4) Due Diligence Steering Committee;

5) NBL ExCom and HR Committee;

6) Information Security Committee;

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7) IT Strategy Committee;

8) Monthly Interest Review Meeting;

9) NBL-GFM Forum;

10) New Product Approval Committee;

11) Nostro Committee;

12) Pricing Advisory Group Committee;

13) Program Board;

14) Regulatory Steering Committee;

15) Technical Change Advisory Board;

16) Candidates Content Meeting;

17) Release Content Meeting;

18) Release Implementation Meeting.

Risk Management Department (“RMD”)

Risk Management department covers two activities.

1) Financial Risk , covering market risk, credit risk, liquidity risk and other financial risks;

2) Operational Risk, covering operational risk events, Risk Control Self-Assessment (“RCSA”), Key Risk Indicators (“KRI”) and Scenario analysis.

(a) Market Risk: qualitative information

Market risk is the risk of losses arising from fluctuations in values of financial assets or debts (including off-balance sheet items) due to fluctuations in market risk factors (interest rates, foreign exchange rates, prices of securities and others). Exposure to this type of risk primarily results from liquidity placement and FX transaction dealing activities.

The related exposure to market risk is considered as non-material by the Bank.

(i) Interest Rate Risk

Interest rate risk is the potential adverse change in the economic value of a financial instrument or portfolio due to fluctuating interest rates.

The Market Risk Appetite of the Bank is to maintain a low materiality of interest rate risk as measured through stress tests.

The analysis of the balance sheet split by time bucket reveals that the Bank is mainly exposed to interest rate risk for periods less than 1 year.

The long term debt schedule, corresponding to the notes issued within the MTN program, is offset by the notional amount of the ELS reported on the assets and liabilities side.

Despite this observation, according to the CSSF circular 16/642, a calculation is performed twice a year to assess the impact on NBL balance sheet of a +/-200 bps movement in interest rates.

The results indicate that the impact of a 200 bps increase of the interest rates on the economic value of the Bank as of 31 December 2018 (last available calculation) would be EUR 2,668,949 (31 December 2017: EUR 833,336).

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On the other hand, the impact of a decrease of 200 bps would be EUR -395,824 (31 December 2017: EUR -953,875).

This stress test confirmed the non-material nature of interest rate risk to the Bank.

(ii) Foreign Exchange Risk

Exchange rates risk is the risk of loss arising from future movements in the exchange rates applicable to the currency positions maintained by the Bank. Similarly to all market risks, foreign exchange risk arises from both open and imperfectly offset or hedged positions.

- Foreign Exchange Risks on Own Positions

Acting upon the clients’ orders, the Bank deals spot and forward transactions in JPY, USD, and other currencies. The highest transaction volumes are being performed on USD and JPY currencies.

The Forex Dealing Department has to cover each customer’s intra-day position. As such, no significant speculative transactions are carried out by the Bank for its own account.

The Banks has adopted an Open Currency Position Policy which defines the following open currency position limits:

- Open currency position less than EUR 150,000 equivalent per actively traded currency (with the exception of USD and JPY less than EUR 500,000 equivalent each);

- EUR 50,000 equivalent per other currency;

- Aggregate open position of EUR 2,500,000 equivalent.

Risk Management Department also performs an independent check against Forex Dealing Department figures and reports to ExCom on a daily basis.

The stress testing scenarios resulted in the worst case to a potential impact of EUR 156,121 as of end of March 2019, which is deemed not material.

- Foreign Exchange Risks on the Custody and Administration Fees

Another source of foreign exchange risk relates to the mismatch between expenses (mainly in EUR) and revenues as the invoices to funds clients are mainly denominated in non-EUR currencies (in USD and JPY).

The Forex Dealing Department has set up a procedure for converting estimated cash inflows resulting from its main source of revenues: the fund custody and administration fees.

The Forex Dealing Department monitors the trends of exchange rate curves and may suggest converting measures to cope with the risk attached to the negative variation of exchange rates.

This process allows the Bank to reduce its exposure on foreign exchange risk.

(b) Credit risk

Credit risk is the risk of loss arising from an obligor’s default, insolvency or administrative proceeding which results in the obligor’s failure to meet its contractual obligations in accordance with the agreed terms.

(i) Counterparty Credit Risk Counterparty credit risk is the risk associated to the deterioration of the creditworthiness of a counterparty.

Because of the nature of its activity, the Bank enters into a reduced set of transactions for its own account.

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The credit risk management and monitoring is performed at two levels:

• Firstly, at local level, by the Risk Management Department;

• Secondly, at the level of the Nomura Group Credit Risk Management.

The applicable framework is defined in the Credit Risk Management Policy.

- On-Balance Sheet Transactions

The counterparty risk for on-balance sheet activities mainly concerns cash placements that are done on a daily basis by the Liquidity Management Department.

The major part of this liquidity comes from the cash held on the funds cash accounts under the Bank’s custody. These cash positions are then placed on the market by the Bank as short-term deposits or reverse repos, or invested in short term securities.

Every day, the Liquidity Management Department monitors its credit limits on the peak exposure of outstanding trades and the maximum tenor, which is a time limit of the exposure, as well as the regulatory large exposures limits.

These exposures are compared to the credit limits to define which initial or additional positions may be taken with a specific counterparty.

At the end of the day, Risk Management Department performs relevant exposure control and monitoring. Moreover, a credit risk report is sent by RMD on a daily basis to the ExCom.

Every morning, an extraction of all cash placements as of last business day is provided to the Nomura Group Credit Risk Management and the same day, the Liquidity Management Department and the Risk Management Department receive back from NIP a detailed report containing all the limits (exposure and tenor) and the actual positions by counterparty.

On top of the Bank’s internal applicable controls, Nomura Group Credit Risk Management also performs the credit exposure monitoring of the nostro accounts the Bank holds with its counterparties and for the overdrafts of the funds accounts in the Bank’s books.

- Off-Balance Sheet Transactions

Foreign exchange transactions

The Bank enters into foreign exchange transactions with the investment funds under administration (in this case, the Bank is the counterparty of the funds) and then an opposite foreign exchange is performed with market counterparties (mainly Nomura Group).

Equity Linked Swaps

The Bank’s exposure to ELS comes from the Medium-Term Notes (“MTN”) program where the Bank is issuing its own Notes.

In that respect, the Bank, as an issuer, is not exposed to credit risk but may be exposed to interest rate risk.

In order to cover this risk, the Bank enters into Equity Linked Swaps with Nomura Securities Co, Ltd. (“NSC”) every time a Note is issued.

This systematic ELS transaction covers the interest rate risk but creates an exposure to a counterparty risk with NSC.

As of 31 March 2019, the exposure to NSC represented EUR 29,341,372 (nominal amount), of which EUR 6,349,659 19,855,904 with a residual maturity less than one year).

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- Netting agreements

The Bank enters into ISDA agreements with its counterparties with whom foreign exchange transactions are dealt.

The Bank benefits from the netting clause of those agreements, such that, in the event of a counterparty’s failure to perform owing to default, bankruptcy, liquidation or any other similar circumstances, it would have a claim to receive or an obligation to pay only the net sum of the positive and negative mark-to-market values of included individual transactions.

To benefit from the netting clause, ISDA agreements are submitted to the CSSF for recognition as credit risk mitigation technique.

- Collateral Management Activities

The Bank is engaged in the following collateral management programmes:

Pledge of assets

Main credit risk exposure towards the investment funds comes from forward foreign exchange transactions. In order to reduce this exposure, the Bank has entered into Credit Support Deeds (CSDs) with certain investment funds allowing taking financial collateral (cash or securities).

In case the exposure with one investment fund is going to exceed the Bank’s Risk Appetite, the adequate amount of eligible collateral is transferred from the investment fund’s portfolio and pledged to the collateral account in order to keep the exposure below the limit.

- Margin calls under CSA

For the forward foreign exchange transactions subject to regulatory margin rules and concluded between the Bank and investment funds or external counterparties, both counterparties to the transaction manage the economic potential loss or gain and require that collateral is allocated to cover the exposure, through a margining process.

The Bank has entered into ISDA/CSA agreements, which describe all the collateral requirements (eligibility, valuation, conditions) that must be followed to cover the mark-to-market exposure arising from these transactions.

In order to make sure that the margin calls are correctly handled, the Bank actively monitors the forward foreign exchange mark-to-market exposure and coverage on a daily basis. The conditions are negotiated by the Bank with the counterparties, and are in line with the Nomura Group Credit Risk guidelines.

- Securities Lending

For the securities lending activity, the Bank acts as an agent to allow Nomura International plc (“NIP”), which is the exclusive borrower, to borrow securities from the portfolios of the investment funds that agree to participate as lenders.

All the securities lent to NIP are pledged by collateral (USD cash amount or G-10 government bonds) in order to cover the counterparty risk. This collateral must represent 105% of the market value of the lent securities.

As agent, the Bank has the responsibility to manage the collateral pledged to cover the counterparty risk. The high eligibility criteria ensure appropriate liquidity of the collateral and the 105% margin covers the potential losses and costs generated by the lent securities buy-in.

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- Exposures classes

The table below shows the credit risk exposure arising from financial assets following the standardised approach. Counterparty credit risk exposure arising from derivatives contracts are measured according to the mark-to-market method. Net exposure consists of the gross exposure less the amount of the collateral received at the reference date.

Balance sheet exposures

31 March 2019 Gross Exposure Credit Risk Mitigation Residual Net Exposure

Central Governments or Central Banks 1,412,738,373 --- 1,412,738,373

Regional Governments or local authorities 200,077,423 --- 200,077,423

Public Sector Entities 30,013,956 --- 30,013,956

Multilateral Development Banks 8,878,258 --- 8,878,258

Institutions 657,898,939 (572,492,252) 85,406,687

Corporates 194,440,484 (129,650,791) 64,789,693

Retail 838,258 --- 838,258

Short-Term Credit Assessment 1,391,988,162 (322,453,668) 1,069,534,494

Equity Exposures 967,880 --- 967,880

Other Items 13,427,574 --- 13,427,574

Total 3,911,269,307 (1,024,596,711) 2,886,672,596

31 March 2018 Gross Exposure Credit Risk Mitigation Residual Net Exposure

Central Governments or Central Banks 473,286,096 --- 473,286,096

Regional Governments or local authorities 529,282,067 --- 529,282,067

Public Sector Entities 60,014,938 --- 60,014,938

Multilateral Development Banks --- --- ---

Institutions 385,254,104 (265,501,817) 119,752,287

Corporates 211,277,056 (112,701,549) 98,575,507

Retail 893,698 --- 893,698

Short-Term Credit Assessment 1,526,048,065 (653,475,853) 872,572,212

Equity Exposures 958,970 --- 958,970

Other Items 13,703,393 --- 13,703,393

Total 3,200,718,387 (1,031,679,219) 2,169,039,168

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Neither past due nor impaired

31 March 2019 Prime Quality High grade Standard Sub- Not rated grade standard grade

Central Governments or Central Banks 648,599,961 764,138,412 --- --- --- --- --- 1,412,738,373

Regional Governments or local authorities --- 200,077,423 --- --- --- --- --- 200,077,423

Public Sector Entities --- 30,013,956 --- --- --- --- --- 3,013,956

Multilateral DevelopmentBanks 8,878,258 --- --- --- --- --- --- 8,878,258

Institutions --- 5,370,162 5,006,491 --- 647,522,286 --- --- 657,898,939

Corporates --- --- --- --- 194,440,484 --- --- 194,440,484

Retail --- --- --- --- 838,258 --- --- 838,258

Short-Term Credit Assessment --- 1,289,127,916 102,860,246 --- --- --- --- 1,391,988,162

Equity Exposures --- --- --- --- 967,880 --- --- 967,880

Other Items --- --- --- --- 13,427,574 --- --- 13,427,574

Grand Total 657,478,219 2,288,727,869 107,866,737 --- 857,196,482 --- --- 3,911,269,307

Off balance sheet exposures Exposure 31 March 2019 Exposure31 March 2018

Guarantees 106,720 122,920

Credit quality per class of financial assets

The table below shows the credit quality by class of credit risk assets, based on the Bank’s credit rating system (gross exposure amounts at the reference date).

Impairment Total

Past due orindividually

impaired

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Neither past due nor impaired

31 March 2018 Prime Quality High grade Standard Sub- Not rated grade standard grade

Central Governments or Central Banks 308,796,569 164,489,527 --- --- --- --- --- 473,286,096

Regional Governments or local authorities --- 529,282,067 --- --- --- --- --- 529,282,067

Public Sector Entities --- 60,014,938 --- --- --- --- --- 60,014,938

Multilateral DevelopmentBanks --- --- --- --- --- --- --- ---

Institutions --- 15,408,888 92,022 --- 369,753,194 --- --- 385,254,104

Corporates --- --- --- --- 211,277,056 --- --- 211,277,056

Retail --- --- --- --- 893,698 --- --- 893,698

Short-Term Credit Assessment --- 1,504,511,710 21,536,355 --- --- --- --- 1,526,048,065

Equity Exposures --- --- --- --- 958,970 --- --- 958,970

Other Items --- --- --- --- 13,703,393 --- --- 13,703,393

Grand Total 308,796,569 2,273,707,129 21,628,377 --- 596,586,312 --- --- 3,200,718,387

Notes:Prime quality: AAAHigh grade: AA-AStandard grade: BBB-BBSub-standard grade: B and less

Impairment Total

Past due orindividually

impaired

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Geographical allocation of risks

As of 31 March 2019 and 2018, the distribution by geographical area of the risks before taking into account collateral held and other credit enhancements can be summarized as follows:

31 March 2019 31 March 2018

Australia 2,158,589 125,589

Belgium 85,256,805 39,600,706

Japan 1,103,857,024 401,428,187

Canada 36,213,574 81,604

Germany 4,716,102 153,218,734

Denmark 1,221,996 299,433

Finland 30,331,508 1,047,780

France 246,293,335 758,991,724

United Kingdom 777,867,072 553,033,973

Luxembourg 716,144,978 557,158,338

The Netherlands 28,379,808 119,223,136

USA 225,214,145 112,631,467

Cayman Islands 189,303,982 206,880,677

Singapore 45,629,562 938,779

Sweden 8,167,533 7,474,856

Switzerland 306,020,219 267,630,050

Other 104,493,075 20,953,354

Total 3,911,269,307 3,200,718,387

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Collateral received or posted

The Bank posts or receives collateral with its counterparties in order to reduce the risk exposure arising from the forward foreign exchange transactions according to the legal agreements signed between parties.

The securities received under reverse repurchase transactions are credit risk mitigants that reduce the credit risk exposure to the concerned counterparties.

31 March 2019 31 March 2018

Fair value of cash collateral posted 56,171,305 49,198,719

Fair value of cash collateral received 118,474,143 104,500,429

Fair value of securities collateral posted 16,582,752 141,658,350

Fair value of securities collateral received from Funds 187,337,117 232,167,885

Fair value of securities collateral received under Reverse Repurchase transactions 886,702,353 951,686,415

Encumbered assets and unencumbered assets

As of 31 March 2019, they are broken down as follows:

Assets Carrying amount Fair value of Carrying Fair value of of encumbered encumbered amount of unencumbered assets assets unencumbered assets assets

Assets 245,663,989 3,732,798,242

Loans on demand 79,034,829 785,883,990

Equity instruments --- --- 13,128,526 13,128,526

Debt securities 166,629,160 166,629,160 836,478,889 836,478,889

Loans and advances other than loans on demand --- 1,787,677,622

Other assets --- 309,629,215

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Loans on demand --- --- ---

Equity instruments --- 55,159,381 ---

Debt securities 106,571,153 957,115,751 ---

Loans and advances other than loans on demand --- --- ---

Other collateral received --- --- ---

Own debt securities issued other than own covered bonds or ABSs --- --- ---

Carrying amount of selected financial liabilities 250,731,917 ---

Derivatives 250,731,917 ---

Deposits --- ---

Debt securities issued --- ---

Other sources of encumbrance 435,112,829 352,235,142

As of 31 March 2018, they were broken down as follows:

Assets 292,054,060 2,912,816,742

Loans on demand 150,395,710 232,128,249

Equity instruments --- --- 12,389,609 12,389,609

Debt securities 141,658,350 141,658,350 612,128,182 612,128,182

Loans and advances other than loans on demand --- 1,798,321,575

Other assets --- 257,849,127

Unencumbered

Collateral received by the Bank

Fair value of encumbered

collateral received or own debt

securities issued

Fair value of collateral received or own debt

securities issued available for

encumbrance

Nominal amount of collateral received or

own debt securities issued not available for

encumbrance

Assets Carrying amount of encumbered

assets


assets

Carrying amount of unencumbered

assets

Fair value of unencumbered

assets

Sources of encumbrance

Matching liabilities, contingent liabilities

or securities lent

Assets, collateral received and own debt securities

issued other than covered bonds and ABSs

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Nominal amount of collateral received or

own debt securities issued not available for

encumbrance


Loans on demand --- --- ---

Equity instruments --- 102,467,371 ---

Debt securities 127,683,784 1,056,702,861 ---

Loans and advances other than loans on demand 104,500,429 --- ---

Other collateral received --- --- ---

Own debt securities issued other than own covered bonds or ABSs --- --- ---

Carrying amount of selected financial liabilities 212,737,617 104,358,476

Derivatives 212,737,617 104,358,476

Deposits --- ---

Debt securities issued --- ---

Other sources of encumbrance 474,860,510 419,879,797

Unencumbered

Collateral received by the Bank


collateral received or own debt

securities issued

Fair value of collateral received or own debt

securities issued available for

encumbrance

Sources of encumbrance

Matching liabilities, contingent liabilities

or securities lent

Assets, collateral received and own debt securities

issued other than covered bonds and ABSs

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Concentration riskConcentration risk arises where the Bank becomes overly exposed on one particular counterparty, business area, issuer or geographical region thereby meaning the Bank’s performance could be overly influenced by a small number of factors.

Large ExposuresThe Bank complies with the Large Exposure limits defined by the applicable regulation, namely the EU Regulation 575/2013 which transposes Basel 3 framework at European level. The total risk exposure towards a single client or group of connected clients must not exceed 25% of the own funds of the Bank. In this context, the Bank has asked for and has been granted by CSSF a partial exemption for its intra-group transactions as follows:

- With NBI, the Bank is benefiting from a global exemption up to EUR 1,5 billion;

- With NIP, the Bank is benefiting from an exemption on forward exchange derivative transactions up to EUR 1,3 billion credit risk equivalent;

- With Nomura Trust & Banking, the Bank is benefiting from an exemption on unsecured cash placement up to EUR 800 million.

Intragroup exposure, in particular towards NIP, has been reduced through the use of short-term reverse repurchase transactions (secured loans).

Exposures with third-party financial institutions are limited to EUR 150 million per counterparty or group of connected clients.

As the Bank is mainly involved with high rated financial institutions established in OECD countries with stable political and economic environment, the country risk can be considered as limited.

Solvency ratio (or Capital ratio)

This ratio, as defined by the applicable regulation, defines the minimum amount of own funds that the Bank has to maintain in relation to the total risk-weighted assets and off-balance sheet items. The minimum level is 8%.

The Bank’s own funds are fully composed of Tier 1 Capital (retained earnings).

As of 31 March 2019, the solvency ratio of the Bank was 82,56% under the EU Regulation 575/2013 (2018: 69,94%).

Impairment

As of 31 March 2019 and 2018, neither specific nor collective impairments have been recorded by the Bank.

(c) Liquidity risk

Liquidity for a bank is the ability to fund increases in assets and meet obligations as they come due, without incurring unacceptable losses, in both normal and stressed circumstances.

Liquidity risk is the risk of losses arising from difficulty in securing necessary funding or from a significantly higher cost of funding than normal levels due to deterioration of the Bank’s creditworthiness or deterioration in market conditions (funding liquidity risk). It is also the risk of losses arising from an inability to easily liquidate assets at the market price because of market stresses or inadequate market depth (market liquidity risk).


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(i) Liquidity Risk Profile

The Bank is a liability-driven bank which does not rely on the interbank market to fund its business. Liquidity is placed with both external and intra-group financial counterparties and in both secured and unsecured form, mainly on an overnight basis. The Bank maintains a securities portfolio as liquidity buffer or for collateral sourcing needs. Therefore, NBL has a very limited exposure to funding-liquidity risk and market-liquidity risk.

NBL holds separately identified portfolios of securities for Liquidity Buffer purpose and as collateral to secure credit lines when required or to meet regulatory margin requirements. Portfolios are not for trading intent.

Regarding derivatives positions, the Bank has entered into:

- Equity Linked swaps with Nomura Securities Co. Ltd (“NSC”) to hedge the MTN program;

- Foreign exchange (“FX”) forward contracts taken for the funds (undertakings for collective investment administered by the Bank): 1 leg with the funds, 1 leg with brokers, both legs offset each other after consideration of market spread and currency position rounding.

Given the hedging and back-to-back structure of the above mentioned derivative positions, these positions do not have a material impact on the Bank’s liquidity position.

NBL may be subject to liquidity risk as a consequence of other risks, as identified hereafter:

- Counterparty-Credit Risk:

For NBL, the failure of its counterparties could impair its cash flows and hence its ability to meet its commitments as they fall due. This risk is mitigated at two levels. On one hand, Forex Dealing Department and Liquidity Management Department deal with selected counterparties within the limits that are in the NBL Risk Appetite Statement and, with particular reference to foreign exchange trades, daily collateral exchange allows the reduction of net exposures.

- Concentration Risk:

Concentrations of assets or liabilities can lead to liquidity problems. This risk is mitigated with the respect of credit and Large Exposures limits which prevent unacceptable concentration of counterparty exposures. Furthermore, the Bank complies with Nomura Global Investment Guidelines setting forth concentration limits in terms of country and product exposures.

- Operational Risk:

Significant problems can arise if the systems that process payment transactions or participants fail or delay transactions. Similarly, disruptions can be caused by operational problems at the level of critical participants or key third-party service providers. Cash Management activities are monitored by the Liquidity Management and Back Office departments. These activities are governed by clearly defined processes and procedures, which are periodically reviewed.

(ii) Liquidity Risk Appetite

The Bank’s liquidity risk appetite is based on both internal and regulatory stress test models:

- Internal – Maximum Cumulative Outflow (“MCO”): The MCO is the Bank’s primary Liquidity Risk Management tool for measuring and monitoring on a daily basis the liquidity pool against two internally defined stress scenarios.

- The Risk Appetite requires that NBL maintains an excess Liquidity Buffer over the 12-month (Market Stress MCO) and 30-day (Acute MCO) outflows. The 30-day Acute MCO survival horizon is consistent with the Nomura Group Risk Appetite and the LCR model, and provides sufficient time to execute actions contained within the Bank’s Contingence Funding Plan (CFP).

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- External – Liquidity Coverage Ratio (“LCR”): The LCR is a regulatory Liquidity Risk measure of a financial institution’s resilience to a stressed net cash outflow over a 30 day period, which is calculated in accordance with rules as set out in the CRR.

(iii) Liquidity Measurement and Stress Testing

The main Liquidity Risk Measuring and Monitoring tools for the Bank are:

1) Maximum Cumulative Outflow (‘MCO’): the MCO is the Bank’s Liquidity Risk management stress test tool for measuring and monitoring on a daily basis the Bank’s liquidity position against internally defined stress scenarios. The purpose of the model is to assess whether the size and composition of NBL’s liquidity pool meets the Bank’s liquidity risk appetite under normal and stressed circumstances.

2) Liquidity Buffer: a portfolio of highly liquid and unencumbered assets which serves as liquidity reserve and that can be monetized over a short time frame whenever deemed necessary to address stressed situations and according to the CFP. It cannot be lower than the internally defined minimum amount of liquidity that the Bank targets to keep available at any time, the Minimum Required Liquidity (MRL);

3) Liquidity Coverage Ratio (LCR): the Bank calculates and reports to the CSSF the LCR on a monthly basis as requested by the regulation EU 680/2014. As of 31 March 2019, the LCR is 277,16% (2018: 181,06%).

(iv) Liquidity Risk Controls and Mitigation

The MCO is run on a daily basis by Risk Management Department.

Liquidity Management Department is responsible for managing the liquidity buffer with “no trading intent” to ensure that the portfolio is classified within the banking book and not trading book. Risk Management Department monitors the value of the liquidity buffer and compares it to the minimum required level of liquidity on a daily basis.

Liquidity Management Department provides ExCom members with a daily report which gives an overview of the liquidity situation of the Bank, including a high-level status of the intra-group concentration. The same information is also used for reporting to Nomura Group Global Treasury and group consolidation.

A liquidity report is run daily and submitted to the BCL. This report identifies the cash inflows and outflows expected in the upcoming five days.

Financial Accounting Department performs the Liquidity Coverage Ratio calculation and reporting to the CSSF and the BCL as required by the authorities.

Lastly, in case of emergency situation of liquidity shortage, the Head of Liquidity Management Department may invoke the Liquidity Task Force which will decide on the activation of the Contingency Funding Plan.

These procedures have been set-out to deal with serious adverse market conditions. They operate on an incremental escalation basis where the triggers and related actions depend on the defined severity level (green, red, amber).


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Duration analysis

The tables below present the analysis of financial liabilities of the Bank by contractual maturity dates (initial maturity):


31 March 2019 ≥1 month ≥3 months ≥6 months ≥1 year ≥2 years < 1month <3 months <6 months <1 year <2 years <5 years ≥5 years Total

Derivatives held for trading 50,656,598 179,285,929 12,085,453 --- --- 1,464,166 7,239,771 250,731,917

Financial liabilities designated at fair value through profit or loss --- --- --- --- --- 5,662,793 14,974,643 20,637,436

Amounts due to credit institutions 16,378,860 --- --- --- --- --- --- 16,378,860

Amounts due to customers N/A N/A N/A N/A N/A N/A N/A N/A

Amounts due to otherfinancial corporations 3,125,535,765 --- --- --- --- --- --- 3,125,535,765


Total financial liabilities 3,206,751,654 179,285,929 12,085,453 --- --- 7,126,959 22,214,414 3,427,464,409

31 March 2018 ≥1 month ≥3 months ≥6 months ≥1 year ≥2 years < 1month <3 months <6 months <1 year <2 years <5 years ≥5 years Total

Derivatives held for trading 27,291,876 170,115,192 5,941,382 --- 16,309 5,197,394 4,026,464 212,737,617

Financial liabilities designated at fair value through profit or loss --- --- --- --- 2,777,231 20,268,986 18,719,258 41,765,475

Amounts due to credit institutions 6,209,107 --- --- --- --- --- --- 6,209,107

Amounts due to customers 2,376,708,146 --- --- --- --- --- --- 2,376,708,146

Amounts due to otherfinancial corporations N/A N/A N/A N/A N/A N/A N/A N/A


Total financial liabilities 2,429,068,538 170,115,192 5,941,382 --- 2,942,540 25,466,380 22,745,722 2,656,279,754

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Duration analysis

The tables below present the analysis of the guarantees of the Bank by contractual maturity dates (initial maturity):

31 March 2019 ≥1 month ≥3 months ≥6 months ≥1 year ≥2 years ≥5 <1 month <3 months <6 months <1 year <2 years <5 years years Undetermined Total

Guarantees --- --- --- --- 76,170 30,550 --- --- 106,720

31 March 2018 ≥1 month ≥3 months ≥6 months ≥1 year ≥2 years ≥5 <1 month <3 months <6 months <1 year <2 years <5 years years Undetermined Total

Guarantees --- --- --- --- 99,520 23,400 --- --- 122,920

(d) Foreign exchange riskForeign exchange risk is the risk that the value of an asset or liability will fluctuate due to changes in foreign exchange rates.

As of 31 March 2019 and 2018, the assets and liabilities denominated in EUR, in JPY, in USD and in other currencies are as follows:

31 March 2019 EUR JPY USD Other Total

Cash, cash balances at central banks and other demand deposits 652,430,190 113,187,987 69,379,416 29,923,263 864,920,856

Derivatives held for trading 1,601,941 82,838,493 161,223,610 2,762,211 248,426,255

Financial assets mandatorily at FVTPL Debt securities 230,091,379 764,138,412 8,878,258 --- 1,003,108,049

Financial assets at fair value through OCI Equity instruments 13,128,526 --- --- --- 13,128,526

Available-for-sale equity instruments N/A N/A N/A N/A N/A

Available-for-sale debt instruments N/A N/A N/A N/A N/A

Financial assets at amortised cost Loans and advances to credit institutions 314,981,357 --- 839,699,019 33,382,250 1,188,062,626 Loans and advances to customers 1,378,679 592,835,474 1,299,464 3,369,841 598,883,458

Loans and advances to households 731,538 --- --- --- 731,538

Tangible assets 2,538,991 --- --- --- 2,538,991

Intangible assets 38,230,017 --- --- --- 38,230,017

Deferred tax assets 2,361,415 --- --- --- 2,361,415

Other assets 7,635,755 2,982,081 7,099,523 353,141 18,070,500

Total assets 1,265,109,788 1,555,982,447 1,087,579,290 69,790,706 3,978,462,231

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Financial liabilities designated at fair value through profit or loss --- 19,617,352 1,020,084 --- 20,637,436

Financial liabilities measured at amortised cost Amounts due to credit institutions 987,220 --- 15,391,640 --- 16,378,860 Amounts due to customers 225,847,747 1,440,032,356 1,394,891,308 64,764,354 3,125,535,765

Other financial liabilities 1,505,808 63,219 8,430,984 4,180,420 14,180,431

Tax liabilities 3,781,490 --- --- --- 3,781,490 of which: deferred tax liabilities 3,563,991 --- --- --- 3,563,991

Other liabilities 6,005,207 5,039,706 475,031 1,043 11,520,987

Total liabilities 241,793,573 1,485,316,287 1,442,980,048 272,676,978 3,442,766,886


Cash, cash balances at central banks and other demand deposits 316,221,803 28,532 55,156,672 11,118,815 382,525,822


Financial assets mandatorily at FVTPL Debt securities N/A N/A N/A N/A N/A

Financial assets at fair value through OCI Equity instruments N/A N/A N/A N/A N/A

Available-for-sale equity instruments 12,389,609 --- --- --- 12,389,609

Available-for-sale debt instruments 589,297,005 152,329,343 12,160,184 --- 753,786,532

Financial assets at amortised cost Loans and advances to credit institutions 241,215,187 154,270,736 1,075,081,426 36,626,960 1,507,194,309 Loans and advances to customers 1,445,444 280,495,447 2,538,907 5,876,690 290,356,488

Loans and advances to households 770,778 --- --- --- 770,778

Tangible assets 1,980,934 --- --- --- 1,980,934

Intangible assets 30,493,505 --- --- --- 30,493,505

Deferred tax assets 2,643,821 --- --- --- 2,643,821

Other assets 7,875,499 3,549,452 6,555,613 482,727 18,463,291

Total assets 1,207,017,403 639,779,563 1,296,060,849 62,012,987 3,204,870,802

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(e) Interest rate riskInterest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments.

The tables below show the interest rate risk by maturity dates (residual maturity):


Derivatives held for trading 996,802 36,676,857 19,087,515 155,976,443 212,737,617

Financial liabilities designated at fair value through profit or loss --- 39,157,318 2,608,157 --- 41,765,475

Financial liabilities measured at amortised cost Amounts due to credit institutions 742,115 1,869,704 3,435,271 162,017 6,209,107 Amounts due to customers 309,437,015 644,709,289 1,362,897,518 59,664,324 2,376,708,146

Other financial liabilities 2,612,328 5,269,075 4,975,492 6,002,514 18,859,409

Tax liabilities 6,447,573 --- --- --- 6,447,573 of which: deferred tax liabilities 3,843,539 --- --- --- 3,843,539

Other liabilities 5,488,235 4,780,110 340,835 845 10,610,025

Total liabilities 325,724,068 732,462,353 1,393,344,788 221,806,143 2,673,337,352

31 March 2019 ≥1 month ≥3 months ≥6 months ≥9 months ≥12 months or <1 month <3 months <6 months <9 months <12 months Undetermined Total

Cash, cash balances at central banks and other demand deposits 864,920,856 --- --- --- --- --- 864,920,856

Derivatives held for trading (ELS) --- --- --- --- --- --- ---

Financial assets mandatorilyat fair value throughprofit or loss 210,061,513 345,307,087 447,739,449 --- --- --- 1,003,108,049

Available-for-sale debt instruments N/A N/A N/A N/A N/A N/A N/A

Loans and advances Loans and advances to credit institutions 985,693,504 202,147,000 --- --- --- --- 1,187,840,504

Loans and advances to customers 599,105,863 23,606 31,429 45,987 25,066 605,167 599,837,118

Total 2,659,781,736 547,477,693 447,770,878 45,987 25,066 605,167 3,655,706,527

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Cash, cash balances at central banks and other demand deposits 382,525,822 --- --- --- --- --- 382,525,822

Derivatives held for trading (ELS) --- --- 5,328 46 13,549 2,877 21,800

Financial assets mandatorilyat fair value throughprofit or loss N/A N/A N/A N/A N/A N/A N/A

Available-for-sale debt instruments 501,325,769 --- 252,460,763 --- --- --- 753,786,532

Loans and advances Loans and advances to credit institutions 1,202,328,930 254,898,268 49,967,111 --- --- --- 1,507,194,309

Loans and advances to customers 290,386,187 57,456 81,299 78,489 76,568 447,267 291,127,266

Total 2,376,566,708 254,955,724 302,514,501 78,535 90,117 450,144 2,934,655,729


Derivatives held for trading (ELS) --- 383,607 292,549 212,699 497,366 7,317,716 8,703,937

Debt certificates designated at fair value through profit or loss --- 581,199 750,677 189,303 3,442,259 15,673,998 20,637,436

Financial liabilities measured at amortised cost Amounts due to credit institutions 16,378,860 --- --- --- --- --- 16,378,860 Amounts due to customers 3,125,535,765 --- --- --- --- --- 3,125,535,765

Other financial liabilities 14,180,431 --- --- --- --- --- 14,180,431

Total 3,156,095,056 964,806 1,043,226 402,002 3,939,625 22,991,714 2,434,071,895

Gap (496,313,320) 546,512,887 446,727,652 (356,015) (3,914,559) (22,386,547) 470,270,098

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(f) Operational riskThe Bank has an Operational Risk Management Policy in place which defines the applicable Operational Risk Management Framework (Risk Appetite, incidents reporting, Key Risk Indicators, Risk and Control Self-Assessment).

Operational Risk is defined as the risk of loss arising from inadequate or failed internal processes, people and systems or from external events. It excludes strategic risk (the risk of loss as a result of poor strategic business decisions), but includes the risk of breach of legal and regulatory requirements, and the risk of damage to the Bank’s reputation if caused by an Operational Risk event.

Operational Risk is deemed to be material for NBL.

Segregation of duties, internal procedures, and technological systems in place mitigate the risk of losses due to errors or inadequacies.

Besides, NBL has an insurance cover up to an amount of EUR 5 million per annum in the aggregate and once this limit has been reached the Bank is covered by a Group insurance up to an amount of GBP 20 million per loss and in the aggregate.

Finally, NBL has business continuity management in place (including a Disaster Recovery Plan) to ensure ability to operate on an ongoing basis and limit losses in the event of severe business disruption.



Derivatives held for trading (ELS) 1,655,086 790,664 931,852 750,853 374,311 4,886,401 9,389,167

Debt certificates designated at fair value through profit or loss 2,226,983 4,625,697 3,427,251 2,370,072 2,722,057 26,393,415 41,765,475

Financial liabilities measured at amortised cost Amounts due to credit institutions 6,209,107 --- --- --- --- --- 6,209,107 Amounts due to customers 2,376,708,146 --- --- --- --- --- 2,376,708,146

Other financial liabilities 18,859,409 --- --- --- --- --- 18,859,409

Total 2,405,658,731 5,416,361 4,359,103 3,120,925 3,096,368 31,279,816 2,452,931,304

Gap (29,092,023) 249,539,363 298,155,398 (3,042,390) (3,006,251) (30,829,672) 481,724,425

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NOTE 34 - FAIR VALUE OF FINANCIAL INSTRUMENTS (in EUR)

The following table summarises the carrying amounts and fair values of financial assets and liabilities at amortised cost in the statement of financial position.

Carrying amount Fair value

31 March 2019 31 March 2018 31 March 2019 31 March 2018

Assets

Cash, cash balances at central banks and other demand deposits 864,920,856 382,525,822 864,920,856 382,525,822

Loans and advances 1,787,677,622 1,798,321,575 1,787,677,622 1,798,321,575

Liabilities

Financial liabilities at amortised cost 3,156,095,056 2,401,776,662 3,156,095,056 2,401,776,662

The fair value of the financial assets and liabilities corresponds to the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

Fair value hierarchy

As of 31 March 2019 and 2018, the Bank uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation techniques:

Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities. This level includes listed equity securities and debt instruments on exchanges (for example, London Stock Exchange, Frankfurt Stock Exchange, New York Stock Exchange) and exchanges traded derivatives like futures (for example, Nasdaq, S&P 500);

Level 2: techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly;

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

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NOTE 34 - FAIR VALUE OF FINANCIAL INSTRUMENTS (in EUR) (continued)

31 March 2019 Level 1 Level 2 Level 3 Total

Financial assets Derivatives held for trading --- 248,426,255 --- 248,426,255Financial assets mandatorily at fair valuethrough profit or loss Debt instruments 1,003,108,049 --- --- 1,003,108,049Financial assets at fair value throughother comprehensive income Equity instruments --- --- 13,128,526 13,128,526Available-for-sale equity instruments N/A N/A N/A N/AAvailable-for-sale debt instruments N/A N/A N/A N/A

Total financial assets 1,003,108,049 248,426,255 13,128,526 1,264,662,830

Financial liabilities Derivatives held for trading --- 250,731,917 --- 250,731,917Financial liabilities designated at fair valuethrough profit or loss --- --- 20,637,436 20,637,436

Total financial liabilities --- 250,731,917 20,637,436 271,369,353

31 March 2018 Level 1 Level 2 Level 3 Total

Financial assets Derivatives held for trading --- 204,265,713 --- 204,265,713Financial assets mandatorily at fair valuethrough profit or lossDebt instruments N/A N/A N/A N/AFinancial assets at fair value throughother comprehensive income Equity instruments N/A N/A N/A N/AAvailable-for-sale equity instruments --- --- 12,389,609 12,389,609Available-for-sale debt instruments 753,786,532 --- --- 753,786,532

Total financial assets 753,786,532 204,265,713 12,389,609 970,441,854

Financial liabilities Derivatives held for trading --- 212,737,617 --- 212,737,617Financial liabilities designated at fair valuethrough profit or loss --- --- 41,765,475 41,765,475

Total financial liabilities --- 212,737,617 41,765,475 254,503,092

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NOTE 34 - FAIR VALUE OF FINANCIAL INSTRUMENTS (in EUR) (continued)

During the years ended 31 March 2019 and 2018, in relation with financial instruments measured at fair value, there were no transfers between the Level 1 and Level 2 categories, and no transfers into and out of the Level 3 category.

During the year ended 31 March 2019, the movement in the financial assets at fair value through other comprehensive income classified in the Level 3 category mainly results from the revaluation of the related assets at their fair value.

During the year ended 31 March 2019, the movement in the financial liabilities designated at fair value through profit or loss can be analysed as follows:

Financial liabilities designated at fair value through profit or loss as of 31 March 2018 41,765,475

Total loss recognized in the income statement 663,430

Issuances ---

Redemptions (24,792,171)

Foreign exchange rates fluctuations 3,000,702

Financial liabilities designated at fair value through profit or loss as of 31 March 2019 20,637,436

NOTE 35 - CAPITAL MANAGEMENT

The Bank maintains an actively managed capital base to cover risks inherent in the business.

The adequacy of the Bank’s capital is monitored using, among other measures, the rules and ratios established by the Basel Committee on Banking Supervision (BIS rules/ratios) and adopted by the Commission de Surveillance du Secteur Financier supervising the Bank.

During the years ended 31 March 2019 and 2018, the Bank had complied in full with all its externally imposed capital requirements.

NOTE 36 - RETIREMENT BENEFIT PLAN

Since 2002, the Bank has entered into an agreement for payment of the retirement pension charges under the corporate defined contribution pension plan organized by its Parent company.

Only expatriate employees of the Bank are entitled to participate into this corporate pension plan.

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NOTE 37 - RELATED PARTY DISCLOSURES (in EUR)

The Bank has a related party relationship with its Parent company, entities of its Group and with its directors and executive officers.

The amounts of assets, liabilities, income and expenses as of 31 March 2019 and 2018 concerning Group entities, including the Parent company and subsidiaries, are split between subsidiaries and other Group companies as follows :

Subsidiaries: 31 March 2019 31 March 2018

Financial assets at fair value through other comprehensive income 13,035,646 N/A

Financial assets at amortised cost – Loans and advances 9,846 ---

Available-for-sale equity instruments N/A 12,305,639

Total assets 13,045,492 12,305,639

Financial liabilities at amortised cost 15,701,678 14,960,842

Total liabilities 15,701,678 14,960,842

Income and expenses 31 March 2019 31 March 2018


Group entities: 31 March 2019 31 March 2018

Derivatives held for trading 48,418,581 29,825,085

Financial assets at amortised cost – Loans and advances 615,101,748 338,352,355

Total assets 663,520,329 368,177,440

Derivatives held for trading 115,787,808 91,859,539

Financial liabilities at amortised cost 156,875,153 98,202,336

Total liabilities 272,662,961 190,061,875

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Income and expenses 31 March 2019 31 March 2018

Net interest income 165,852 7,089,157


Total income and expenses 2,804,009 9,412,122

The Bank’s incurred expenses with respect to the remuneration of the members of the administrative, management and supervisory bodies of the Bank are as follows:

31 March 2019 31 March 2018

Supervisory bodies --- 58,500

Managerial bodies 1,088,740 1,302,297

Corporate pensions 45,318 81,362

Total 1,134,058 1,442,159

For guarantees granted on behalf of Managerial bodies, please refer to Note 31.

NOTE 38 - SUBSEQUENT EVENTS

The Bank is not aware of any adjusting or non-adjusting event that would have occurred between 31 March 2019 and the date when the present Financial Statements were authorised for issue.

NOTE 37 - RELATED PARTY DISCLOSURES (in EUR) (continued)

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NOTE 39 - PROPOSED ALLOCATION OF RESULT

The Board of Directors proposes the following allocation of result:

Amounts available

Profit for the year ended 31 March 2019 16,918,453

Retained earnings as of 31 March 2019 414,897,325

Total 431,815,778

Proposed allocation

Distribution of dividend 10,360,000

Allocation to the 2020 NWT Reserve 15,000,000

Release of the 2014 NWT Reserve (8,500,000)

Allocation to Retained earnings 414,955,778

Total 431,815,778

This proposition will be submitted to the approval of the shareholders on 3 July 2019.

Nomura Bank (Luxembourg) S.A.Financial Statements,Directors’ report andIndependent auditor’s report

as of 31 March 2019

Nomura Bank (Luxembourg) S.A.33, rue de Gasperich - Building AL-5826 Hesperange

R.C.S. Luxembourg: B 032.921

NIEDERANVEN

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Nomura Bank (Luxembourg) S.A. · Nomura Bank (Luxembourg) S.A. Financial Statements, Directors’ report and Independent auditor’s report ... (Luxembourg) S.A. (hereinafter referred